All CUs should communicate and help members navigate potential scams to safeguard their financial well-being.
As student loan repayment resumes after more than a three-year pause, borrowers face not only the challenge of managing their payments but also an increased risk of falling victim to scams.
The shifting landscape of loan servicers, unfamiliar payment procedures and the potential confusion surrounding repayment options create opportunities for scammers to exploit unsuspecting individuals.
Even credit unions that are not involved in student lending should proactively communicate these risks and help members navigate potential scams to safeguard their financial well-being.
1. Servicer Scams
It is crucial that members stay informed about changes in loan servicers. According to the CFPB, approximately 65% of student loans have had their servicers changed in the last three years. Many borrowers may be unaware of their current servicer’s identity due to the loan payment pause. This lack of knowledge presents a prime opportunity for scammers to step in and deceive borrowers.
To mitigate this risk, credit unions should educate borrowers about resources like the servicer lookup tool provided by Payitoff.io. This tool allows individuals to easily find their servicer and ensure they are sending their payments to the correct entity.
2. Consolidation Scams
Credit unions should also make members aware of fraudulent offers to consolidate loans “for a fee.” Federal Student Loans can be consolidated at no cost through the official website at studentaid.gov; therefore, members should be advised against engaging with unauthorized third parties claiming to consolidate loans for a charge.
3. Discharge Scams
Credit unions should also communicate to members of fraudulent calls or robocalls claiming that they qualify for full or partial loan discharge. Scammers may request a fee to facilitate the loan forgiveness process and gather personal information for potential identity theft. Legitimate loan discharge programs do not require upfront fees.
4. Loan Negotiation Scams
Scammers may also attempt to charge fees to negotiate special deals with lenders on a member’s behalf. It is essential that credit unions educate members that loan negotiation is not a viable option. If members receive emails or calls offering assistance with loan negotiation, credit unions should advise them to exercise caution and verify the legitimacy of the source before sharing any personal information.
Guard Against Fraudulent Communications
Across all scam types, credit unions should encourage members to exercise vigilance when encountering unexpected calls or emails claiming to be from the Department of Education or other government agencies.
Scammers often attempt to mimic legitimate communication channels, such as using deceptive email addresses that resemble those of genuine government agencies. Credit unions should alert members about the dangers of divulging personal information through these channels and encourage them to always verify the legitimacy of the contact.
Payment Options and Considerations
Beyond scams, credit unions should also inform members about the risks of certain repayment options. When discussing payment options with loan servicers, borrowers must exercise caution and carefully evaluate their choices. Some programs offer lower monthly payment amounts, assuming future income growth. While this may provide temporary relief, it is important that members consider the long-term implications. Credit unions should help raise awareness of this.
By deferring a portion of the principal, borrowers may also incur higher interest fees over time, resulting in increased overall repayment costs. It is crucial to strike a balance between manageable payments in the present and minimizing long-term financial burdens. Again, credit unions must ensure members are aware of the potential impact this may have on their financial well-being.
As the resumption of student loan repayment creates an environment ripe for scams, credit unions must be proactive in protecting their members, regardless of whether they offer or service student loans. After all, credit unions are known for their commitment to members and pride themselves on driving exceptional service and support. With over 43 million Americans currently holding a student loan, every credit union will have members affected.
Knowing their loan servicers, being aware of common scam tactics and understanding payment options can help members navigate this challenging landscape – and credit unions are uniquely positioned to be a reliable source of guidance.
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