Student Loan Scams: Voicemail Edition

October 29, 2019

Robocalls. They’ve become so common and irritating that we rarely answer our phones if we don’t recognize the number. The voice messages these scammers leave range from humorous to threatening – from the “local police” waiting to take you into custody, to a stranger offering cash for your home.

A recent string of messages hits particularly close to home for the 45 million U.S. borrowers who owe $1.5 trillion in student loans. These calls claim changes to federal student loans or advertise offers of forgiveness of student loan debt. Some people who find these messages in their voicemail don’t even have student loans. But for the 45 million Americans who do, the offers can be a little too tempting. Student loan debt is a burden that we want to find a way out of and sometimes, what sounds to be too good to be true is in fact that. So much so, that we’re willing to put on earmuffs when it comes to a quick way out.

These scammers are after social security numbers, credit card numbers, federal student aid IDs, or for a victim to contribute money to a loan assistance program that (surprise, surprise) has no intention of helping you with your student loans. A reputable company will never ask for any of these things over a voicemail or on the phone.

So how are borrowers supposed to know what offers to be wary of? Let’s run down a list of common tactics for student loan voicemail scams.

Student Loan Scam Tactic #1: They Offer to Abolish Your Student Loans

This tactic is just what it sounds like: fraudsters offering to completely do away with your student loan debt. The scam is tricky because there are federal loan forgiveness programs that pay the balance of your loan under certain circumstances, like if you join the military or qualify and meet the requirements of the Public Service Loan Forgiveness (PSLF) program. We’ve outlined how the PSLF program works in a previous blog post.

The offer from the scammer usually sounds something like, “we’ll release your student loans for a nominal, upfront fee.” The red flag is the advance payment – something legitimate organizations would never do. It’s actually illegal for companies to make you pay before helping you. This claim is even more suspicious when they offer “quick” student loan forgiveness. In actuality, the Public Service Loan Forgiveness program takes years to complete and includes detailed requirements for qualifying. To put it simply, if you have student loan debt, you must repay that debt. If you are having a challenge repaying your student loans, contact your lender or a reputable resource focused on assisting people in your situation.

Student Loan Scam Tactic #2: They Offer “Exclusive” Access

Some voicemails promote programs for reducing student loan monthly payments or even your total balance as part of an exclusive offer. However, companies who have your real best interest at heart would never make promises or offers without first knowing your personal financial situation.

Student Loan Scam Tactic #3: They Convince You to Act Quickly

These student loan voicemail scams work by telling you to call back “right away” or risk losing your offer. But you should never be pressured into an offer. You student loans will remain subject to your existing agreements with your student loan lender unless you take action to change them, such as by refinancing your student loans with a new lender. Don’t feel pressured to make a choice now. A company can only propose different rates or terms based on your applying for a new program. Take your time and do your research on who is making the offer and determine if they are a reputable organization with experience in student loans and student loan refinancing.

Student Loan Scam Tactic #4: They Use Political Buzz For Power

For borrowers with federal student loans, scammers sometimes claim transitions in presidential administrations have ushered in changes to student loan laws, for example, the switch from the Obama to the Trump administration. Scammers get fuel from the fact that many politicians are currently talking about student loan debt. They believe borrowers will get confused between the different proposals and plans and assume they’ve heard of the offer. Once you’ve given them your data, they have all they need.

Student Loan Scam Tactic #5: They Tell You That You Can’t Do It Without Them

This is the classic scammer line: you need me or else you will miss out on this great opportunity. We hate to break it to those scammers, but there’s nothing that they offer that you can’t do on your own – for free. You can explore lowering your student loan interest rate, negotiate new loan repayment terms, and even try to qualify for PSLF all on your own, without paying a company to assist you.

How Do You Avoid These Scams?

Now that you know what phony offers are out there, there’s one simple way you can avoid scammers: don’t answer the phone and don’t call them back.

If you do answer the phone—and realize it’s a robocall—hang up and don’t push any buttons or engage in conversation. This is one situation where you should push manners to the side and get off the line as quickly as possible.
Do your research into who is calling you and reach back out to them through the official phone number from their website if necessary.
Remember, anyone can build a website. Make sure you validate a student loan company is authentic by looking for indicators, such as sufficient user reviews on reputable sites and a listing on the Better Business Bureau.

The U.S. Department of Education has outlined steps you can take to avoid student loan scams and listed companies they’ve taken action against.

If you’re looking to consolidate or refinance your student loans for a potentially lower interest rate or new repayment terms, the team at ELFI* can walk you through the entire process and help you decide if it’s right for you.

*Subject to credit approval. Terms and conditions apply.

NOTICE: Third-Party Web Sites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

GOP Concerns Over Costs Could Limit Student Loan Relief In Next Stimulus

GOP Senate leaders are showing increasing concern about the costs of additional economic relief, particularly when it comes to student loan relief, as they weigh a second stimulus bill.

Source: Forbes

Democrats Fail to Override Trump Veto on Student Loan Policy

This Friday, House Democrats were unable to override the Trump Administration's veto on a proposal to reverse the Education Department's strict policy on loan forgiveness for students misled by for-profit colleges. The House voted 238-173 in support of the override measure, coming up short of the two-thirds majority needed to send it to the Senate.

Source: ABC News

Study Finds Gen Z Borrowers Are Unaware of COVID-19 Student Loan Relief Programs

While the CARES Act allowed those with federal student loans to pause payments until September, a recent survey from Student Debt Crisis shows that Gen Z borrowers, in particular, were the least aware of the relief program.

Source: CNBC

Author Shares Her Big 'Wake Up Call' That Led Her to Pay Off $81,00 in Student Debt

35-year-old Melanie Lockert, the author of "Dear Debt," shared with CNBS the story of how she was able to pay off $81,000 in student loan debt over 9 years, with her big wake up call coming five years into repayment.

Source: CNBC

That wraps things up for this week! Follow us on Facebook, Instagram, Twitter, or LinkedIn for more news about student loans, refinancing, and achieving financial freedom.

Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

2020-07-08

Dash Through the Debt: How a Shorter Student Loan Term Adds Up

If you’re like most college graduates, you’re sick of your student loans. If you want to get rid of your debt once and for all, refinancing your loans and opting for a shorter student loan term is a smart strategy. You can secure a lower rate and pay off your loans years ahead of schedule while saving thousands. Here’s what you need to know about shortening your loan term, as well as how much shortening your student loan term could save you.

How long does the average graduate take to repay their student loans?

When you graduate from college, you likely expect to pay off your student loans quickly. However, life often gets in the way of your plans, even if you make a good salary. While the Standard Repayment Plan for federal student loans is ten years, many students extend their repayment terms with income-driven repayment plans, forbearance or deferment periods, or by missing payments altogether. According to the One Wisconsin Institute, the average length of repayment for graduates with bachelor’s degrees is 19.7 years. If you have graduate student loans, the average repayment period is even longer. With such a longer repayment term, you’ll pay thousands of dollars in interest charges on top of what you initially borrowed, adding to your loan's total cost. And, carrying such a heavy financial burden for decades can force you to put off other goals, like buying a house, starting a business, or even getting married.

How to get a shorter student loan term

When you take out a student loan, you sign a loan agreement or promissory note where you promise to pay the loan back according to set repayment terms. The agreement will outline the loan’s interest rate, payments, and loan term. Many borrowers don’t realize that you’re not stuck with those terms forever. If you’re unhappy with your current loan’s repayment terms or your finances improve, there is a way to change them: student loan refinancing.* When you refinance your debt, you apply for a loan from a lender like Education Loan Finance for the amount of your total existing student loan debt. If you have both federal and private student loans, you can combine them so you’ll have just one loan to manage and one monthly payment to remember.* The new loan will have different terms than your old ones, including the interest rate and monthly payment. When you apply for the loan, you can choose your own loan term that works for your goals and budget. For example, if you currently have a ten-year loan term, you can select a five or seven-year loan if you'd prefer a shorter term.

Benefits of a shorter student loan term

Instead of making payments for 20 years or more, it’s a good idea to select a shorter loan term, if you can afford it. Opting for a shorter student loan term has many advantages:

1. You can get a lower interest rate

When you have a long loan term, lenders consider you to be a riskier borrower and they charge you a higher interest rate. You’ll have a lower monthly payment, but the longer loan term will cost you more money in interest charges over time. By contrast, lenders reserve their lowest interest rates for credit-worthy borrowers who choose the shortest loan terms. If you want the best possible rate, opting for a shorter loan term will allow you to save money. You’re probably wondering, “How much can I save by shortening my loan term?” Let’s look at an example. Pretend you had $30,000 in student loans with a ten-year loan term at 5% interest. By the end of your repayment term, you would repay a total of $38,184; interest charges would cost you $8,184. If you refinanced your loans and chose a five-year loan and qualified for a 3.19% interest rate, you’d repay just $32,496 over the life of your loan. By refinancing your debt and selecting a shorter loan term, you’d save $5,688.

Original Loan

Balance: $30,000 Interest Rate: 5% Loan Term: 10 Years Minimum Payment: $318 Total Interest: $8,184 Total Repaid: $38,184

Refinanced Loan

Balance: $30,000 Interest Rate: 3.19% Minimum Payment: $542 Total Interest: $2,496 Total Repaid: $32,496

2. You’ll pay off your debt earlier

When you choose a shorter loan term, you’ll be able to pay off your debt years ahead of schedule. Not only will you save a significant amount of money in interest charges, but you’ll also have the psychological benefit of not having to worry about debt any longer. If your student loan balance was causing you stress, that’s a significant advantage, and a huge weight off your shoulders.

3. You’ll free up cash flow

Once you’ve paid off your student loans, you’ll free up extra cash flow. You’ll no longer have to make your monthly loan payment, so you can instead direct that money toward other goals, such as saving for retirement, boosting your emergency fund, or buying a home. If you use the above example, you’d have $542 per month you could use to fund your financial goals. To put that in perspective, let’s say you paid off your loans by the time you turned 27. After that, you invested the $542 you were paying toward your student loans into your retirement nest egg. If you contributed $542 every month into your retirement fund and earned an 8% annual return, on average, your account would be worth over $1.8 million by the time you reached the age of 67.

The bottom line

While extending your loan term may seem like a good idea to get a lower monthly payment, that can be a costly mistake. You’ll have to pay a higher interest rate and, over time, the longer loan term will cause you to pay back far more in interest charges. Instead, consider refinancing your loans and selecting a shorter student loan term. You’ll be debt-free sooner, and you may save a substantial amount of money. To find out how much you can save, use the student loan refinance calculator.*

*Subject to credit approval. Terms and conditions apply. Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

2020-07-02

Should You Keep Paying Federal Student Loans During CARES Act Suspensions?

You probably already know that the CARES Act has suspended Federal student loan payments for the time being. Until September 30th, you aren’t required to make payments, and the interest rate of your loans is set to 0%. This is primarily to help those with student loans who are struggling during these uncertain times. If your student loans are in forbearance due to the CARES Act suspensions, you have several repayment options based on your financial goals.

Option 1: Take Advantage of That 0% Interest

Normally, when making extra payments on student loans, your money is first attributed to any collections charges or late fees, then to accrued interest, then to the principal itself.

With the current 0% interest rates, however, if your account doesn’t have any fees or charges, you’ll save some money at that step. The more you can reduce your principal balance, the more money you’ll save over time in interest.

For example, let’s say you have $25,000 in student loans at a 4% interest rate and you want to pay it off in the next 10 years. Over that period, you accrue $5,373.54 in interest. However, if you take advantage of the CARES Act 0% interest, you can change the course of your repayment.

For instance, if you continue to pay your student loans during this period, the payments will be attributed straight to principal and will save you about $300 in accrued interest over the course of your repayment.

Option 2: Wait Until September And Resume Payments

If the coronavirus has affected your finances, don’t worry about paying down your student loans too quickly. Instead, use this time to get your other debts under control. Focus on paying back higher interest rate debt, like credit card debt, which will impact your long-term financial health.

Option 3: Refinance and Take Advantage of Low Interest Rates

During this time, many student loan refinancing companies are offering low interest rates. If you’re locked into an unfavorable rate, this would be a great time to consider refinancing student loans to save on interest costs.

This is an especially great option for borrowers with private loans, as these types of loans aren’t currently receiving any type of federal forbearance benefit. For a personalized look at how refinancing could improve your financial health, check out the ELFI Student Loan Refinancing Calculator.*

So, should you keep paying federal student loans during the CARES Act suspensions? The answer depends on your unique goals. Whether you choose to pay your federal loans, take care of other expenses, or refinance your student loans, this is a great opportunity to eliminate some additional debt before the September 30 deadline. Happy saving!