It’s open season to begin seeking student-debt relief of $10,000 — or up to $20,000 for Pell Grant recipients — but regulators worry it could also be open season for fraudsters to bilk borrowers out of money. A day after President Joe Biden announced the launch of a Department of Education web portal to submit applications on Monday, the Federal Trade Commission highlighted the tricks and perils to avoid.
The FTC and other federal agencies have been alerting borrowers about potential scams, warning people against paying for help with a process that is free or sharing certain pieces of sensitive data with third parties. With the application portal now open, “of course, scammers are on the move — trying to get your money and personal information,” K. Michelle Grajales, an attorney in the FTC’s Division of Financial Practices, wrote in a consumer alert. The Biden administration’s student-loan forgiveness order would erase up to $10,000 in federal student debt for borrowers earning less than $125,000 a year. People who used Pell Grants to attend college could be poised to also get an additional $10,000, totaling $20,000 in potential relief for them. More than 8 million people already applied over the weekend, Biden said Monday, estimating that approximately 40 million people stand to gain from the debt relief. Applying “takes less than five minutes,” he noted. The application window runs through Dec. 31, 2023.Lawsuits challenge debt forgiveness To be clear, the path to debt forgiveness is not guaranteed for the controversial plan. Lawsuits, including one from six Republican-leaning states, allege Biden’s loan-forgiveness order is unfair and beyond the president’s statutory power. The case, Nebraska v. Biden, is pending in the Eastern District of Missouri. Borrowers keenly eyeing their bottom line in a time of hot inflation cannot control the outc …