A relief has been extended to millions of individuals who need to pay back their student loans. The U.S. Department of Education announced the extension on the moratorium for repayments.
Secretary of Education Miguel Cardona said that the extension, which will last until Jan. 31, 2022, will give borrowers plenty of time to restructure and plan their repayments. In March 2020, President Donald Trump's administration agreed to freeze student loan repayments until September 2021 in response to the COVID-19 crisis.
Following the Education secretary's announcement, President Joe Biden said that this would be the "final" extension to allow borrowers to transfer their loans to other services companies. According to Forbes, two providers -- FedLoan Servicing and Granite State Management - might no longer be under contract with the government by the end of 2021, and borrowers will need to transfer providers to avoid confusion and keep their repayments in order. Borrowers have also been notified of this shift.
Loan Forgiveness Stalls
However, borrowers are still waiting on Biden's campaign promise to cancel $10,000 from their student loans despite the two-year freeze. Congress said that Biden could not cancel student debts through an executive order; thus, the promise has stalled.
Biden's Democratic allies in Congress said that they would explore other options. The Department of Education said that Biden had forgiven 92,000 borrowers covering $1.5 billion of repayments since taking office. These borrowers were mostly victims of fraud.
Scams On the Rise
Meanwhile, amid the confusion on repayments and loan forgiveness, scams victimizing borrowers abound.
Kathleen Young told CNBC that she got an unusual call from an alleged provider who said she could have her loans consolidated in 60 payments and then receive loan forgiveness. After her phone conversation with the provider, Young realized that something was off with the call. She looked up the company online, confirmed the red flags, and immediately shifted providers. She also had her Social Security number monitored.
According to Kristen Evans of the Consumer Financial Protection Bureau, scammers have been taking advantage of the financially vulnerable looking for relief in this pandemic. Evans said that these scammers obtain debt information and credit reports illegally to make their operations appear legit.
She said borrowers should be careful about responding to suspicious emails or discussing extra charges on their loans. Details like Social Security number, student aid ID and financial records are supposed to be logged in the portal of an authorized company, so they won't have to ask for these from the borrower.
Borrowers who may have been scammed must immediately call their bank and credit card company to stop the repayments. They also need to call their service provider to inform them that their account may have been compromised and then get a credit score report to ascertain that nothing suspicious went on. They can also file a complaint with the Federal Trade Commission to inform other borrowers of the potential scam.
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