We recently received word of one of the most clever, and therefore most dangerous, student loan scams.
The scam is really simple. Student loan borrowers receive a call about their student loans. The call ID shows up as a US government number if googled. The scammers apologize for an incorrect interest calculation on the borrower’s account. To fix the extra interest charge a refund will be issued. They just need your bank account information.
What makes this scam so dangerous?
The scary part about this scheme is that it is so reasonable. Many careful borrowers could fall for this one. Several items within the scam will not raise red flags.
- Call comes from a number associated with the US government – Borrowers who are smart enough to google the number that shows up in their call ID will be lulled into a false sense of security. That is because these scammers are able to spoof the call ID system to get a reputable phone number to show up.
- There is an accounting error and too much interest has been charged – This is a common issue that happens all of the time with student loan companies. Most borrowers will not be surprised to hear that this is the issue.
- The caller wants to issue a refund – This is the final step in the scheme. By this point borrowers who are not careful will gladly share their bank account information because they are getting a refund… not being charged extra. As soon as the bank account information is shared victims see money disappear rather than get deposited into their account.
Identifying the red flags
Even with a clever scam such as this one, there are a few red flags that should alert borrowers.
- Caller doesn’t know anything about your account – The people behind these calls will not know the name of your student loan company or the balance of your account. At most, they will know your name. When you call a financial company, you have to prove your identity. When they call you, make sure they prove theirs.
- Accounting errors are treated differently – Student loan companies are not in the habit of giving money to borrowers in repayment. While interest calculation errors are common, the way this is corrected is to adjust the principal balance. There is no reason that a lender would issue a refund.
- They can’t credit your account or issue a check – When someone calls offering a “refund” ask them to credit your account or to issue a check. With any reputable lender, this will not be an issue. The only people who will take issue are scammers who want nothing more than your bank account information.
The good news with this particular scam is that so far it has only been reported from a small county in Northern Kansas. The bad news is that variations on this scam are likely on their way.
At this point the best practice for dealing with your student loans might be to only discuss personal information when you make the call to your lender. Insisting on being the person to initiate phone calls could be tedious and might cause a headache or two, but it is a good way to play things safe.
Regardless of the situation, if you find yourself on the phone with any financial company and things seem off, get their contact information and end the call. Give yourself a couple of hours or even a couple of days to think things through. Talk it over with friends or family if you have any doubts. The people who get scammed often realize the red flags were there, they just didn’t notice them in the moment.