The Federal Trade Commission issued a consumer advisory Saturday warning the public about potential student debt relief scams in the wake of the U.S. Supreme Court's ruling that knocked down President Joe Biden's plan to forgive up to $20,000 in college debt for some borrowers.
"If you have federal student loans, you've probably heard about the Supreme Court decision and know that repayments are restarting in October," the FTC alert said. "But you might also be hearing from scammers who take advantage of confusion around big news like this."
On Friday, the high court voted 6-3 to rebuke Biden's program which would forgive $10,000 for around 40 million borrowers earning up to $75,000 per year, and another $10,000 for borrowers who received Pell grants.
In its opinion, the majority said that the program, which would carry an estimated price tag of around $400 million, had to be approved by Congress first, and that Biden lacked the Constitutional authority to forgive the debt on his own.
"All this leads the court to conclude that 'the basic and consequential tradeoffs' inherent in a mass debt cancellation program are ones that Congress would likely have intended for itself," the opinion written by Chief Justice John Roberts said. "The HEROES Act provides no authorization for the [Department of Education] Secretary's plan when examined using the ordinary tools of statutory interpretation."
Because loan payments, which were paused during the COVID-19 pandemic, are scheduled to start again in October, the FTC is advising borrowers to prepare to restart payments by going to the Federal Student Aid website and checking on their account, as well as updating information and enrolling in a payment plan.
The agency said that borrowers should be concerned about offers to "help" in the wake of the court decision because they could be scams.
"If you're worried about repaying your loans, the offers to 'help' can be tempting," the FTC alert said. "Scammers are likely to start blasting out robocalls and texts about 'helping' you with your loans."
According to the agency, borrowers should never "pay for help" with student loans because there is nothing a company could do that the borrower could not do themselves through the government.
The agency also warns student loan holders to not give out their government site login information to any third party, which would likely lead to identity theft, and not to trust anyone promising debt relief or loan forgiveness.
"Scammers try to look real, with official-looking names, seals, and logos," the advisory said. "They promise special access to repayment plans or forgiveness options — which don't exist. If you're tempted, slow down, hang up, and log into your student loan account to review your options."
In a statement following the decision, Biden said that he will pursue "other avenues" to try and grant the relief.
"I will stop at nothing to find other ways to deliver relief to hard-working middle-class families," Biden said. "My Administration will continue to work to bring the promise of higher education to every American."
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