New York Attorney General Letitia James is warning student loan borrowers to be on alert for scams as changes to federal student loan programs create confusion over repayment options and financial relief.
James issued a consumer alert urging New Yorkers to watch for fraudsters who are attempting to take advantage of borrowers navigating changes to federal repayment programs. The changes include the elimination of the Saving on a Valuable Education (SAVE) payment plan and the phaseout of existing income-based repayment plans.
“Student loans are already a burden, and the federal administration’s changes to loan repayment programs are making it even harder for borrowers to manage their finances,” James said. “Now scammers are exploiting the confusion about new student loan plans to prey on borrowers.”
According to the attorney general’s office, borrowers should be particularly cautious about companies or individuals offering guaranteed loan forgiveness or promising to eliminate student debt quickly.
Federal student loan programs do not require borrowers to pay a private company for access to repayment options. James is warning borrowers to be suspicious of unsolicited calls, emails and online advertisements promising immediate debt relief.
Borrowers should also avoid companies that create a sense of urgency by claiming they must act immediately to qualify for a program. Legitimate student loan programs do not require borrowers to make rushed decisions.
Another red flag is a request to sign a power of attorney. According to James’ office, borrowers should never give power of attorney to an unfamiliar person or company simply to obtain student loan assistance.
Borrowers should also be careful about companies claiming to be affiliated with the federal government. Most importantly, New Yorkers should never provide their Federal Student Aid identification or login credentials to anyone. The Department of Education or a borrower’s loan servicer will not ask for those login credentials.
James is also reminding New Yorkers that charging upfront fees for student-loan-related services is illegal under New York law. Borrowers who encounter companies requesting upfront payments should report the practice to the Office of the Attorney General.
For accurate information, borrowers can consult the New York Attorney General’s Student Lending Guide, the Education Debt Consumer Assistance Program (EDCAP) and the National Consumer Law Center’s Student Loan Borrower Assistance Project.
New Yorkers who believe they have encountered a student loan scam can report it to the Attorney General’s Office.
The warning comes as borrowers navigate an evolving federal student loan landscape. With repayment rules changing, James’ office is encouraging consumers to rely on trusted sources rather than unsolicited offers that promise quick or guaranteed relief.