New York Attorney General Letitia James issued a statewide consumer fraud alert Wednesday warning student loan borrowers to watch for companies demanding fees, promising rapid debt forgiveness or seeking account credentials as federal repayment programs change.
James said the elimination of the Saving on a Valuable Education plan and the phaseout of existing income-based repayment plans have created confusion that scammers are using to target borrowers seeking affordable payments or financial relief.
Federal student loan programs do not charge borrowers for access, the attorney general's office said. Offers to help with federal loans in exchange for a fee can be misleading, and no private company can guarantee complete forgiveness or erase debt within a short period.
Borrowers should also be skeptical of unsolicited calls, emails and online advertisements, particularly when a company claims a person must act immediately. The office said legitimate student loan programs do not require borrowers to make decisions under artificial deadlines.
James advised borrowers not to sign a power of attorney for anyone they do not know and trust. Enrollment in a repayment plan or other payment relief does not require borrowers to give a company that authority.
Companies may falsely suggest they are connected to the federal government. Borrowers should never share their Federal Student Aid identification or login credentials because the U.S. Department of Education and loan servicers will not ask for those credentials, the office said.
Access to an account could allow a scammer to change personal information and repayment settings. The attorney general also warned borrowers not to pay upfront fees to companies that solicit them for student loan services, saying New York law prohibits those advance charges.
The office recommends using verified resources, including its Student Lending Guide, the Education Debt Consumer Assistance Program and the National Consumer Law Center's Student Loan Borrower Assistance Project. EDCAP can be reached at 888-614-5004 or edcap@cssny.org.
James encouraged New Yorkers to report suspected student loan scams to the attorney general's office. She said borrowers already dealing with repayment uncertainty should not have to absorb additional losses caused by fraud.
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