Student Loan Repayment Plans Might Be Costlier Than Expected

It’s hard to argue against making student loan payments more affordable.

Millions of people who struggle to pay their loans have found relief by signing up for student loan repayment plans that allow them to reduce their monthly bill based on a percentage of their income.

The program is now getting new scrutiny after a Government Accountability Office report found that the cost of the program was more than double the amount the Department of Education had budgeted. As a result, taxpayers are now on the hook to forgive at least $108 billion in student loans, the GAO estimates.

Many borrowers are also paying more than they expected. The appeal of these plans is that they cap your monthly payment to 10 percent of your income. If you haven’t paid the loan off after 20 to 25 years (depending on when you took it out and the kind of loan you have) the remaining balance is canceled.

But there’s a downside. Even though you reduce the amount that you pay, interest continues to accrue on the balance. That means you could end up owing more than if you were on the standard 10-year student loan repayment plan. And if the loan is forgiven, you’ll owe income taxes on that balance.

There are exceptions. If you’re in a public service loan forgiveness program and make 10 years of qualifying payments, you won’t owe taxes. And if you’re insolvent at the end of a 20- or 25-year forgiveness period, the tax bill may be waived.

Choose Carefully

If you’re in a student loan repayment plan like this now or think you’ll need one, here’s what you should know to ensure it doesn’t cost you more than you expected.

There are five income-driven student loan repayment plans. The one you choose can have a big impact on how much you end up paying in total. If you can qualify (you have to prove financial need), the optimal plans for lowering your monthly payment are the Pay As Your Earn (PAYE) and Revise Pay As You Earn (REPAYE) plans.

Most recent borrowers who demonstrate financial need can use PAYE. This plan limits your payments to 10 percent of your discretionary income, caps your payments, and has a 20-year forgiveness period. The REPAYE plan is even more generous because it’s available to all direct federal loan borrowers regardless of when they took out their loans. You don’t have to prove financial hardship. It also reduces payments to 10 percent of your discretionary income, and there’s no cap on payments. As your income rises, so do your payments.

Not all loans are eligible. Income-based student loan repayment plans are available only to people who borrowed directly from the federal government. Before 2010, private banks made loans that were guaranteed by the federal government—Federal Family Education Loans. Those borrowers can qualify for income-based repayment, but they can access the other income-driven plans only if they consolidate their loans. If you have a Parent PLUS loan, you can do income-contingent repayment, which caps your payments at 20 percent of income. But there’s no limit to how much your monthly payments can grow. Private loans aren’t covered, though you can ask your lender whether you can work something out.

There’s lots of paperwork. Qualification depends on your income, and you have to be certified every year. Fill out a student loan repayment plan request with the DOE’s Office of Federal Student Aid and submit it to your loan servicer. He or she will review the paperwork and let you know whether you qualify. Once you are enrolled in a student loan repayment plan, you need to submit new paperwork to your servicer every year to show your expected income.

You must make steady payments. You have to make regular payments for the loan to be eligible for forgiveness. They don’t have to be consecutive, but if you stop paying—say for a deferment for grad school or a forbearance—you’ll need to resume the number of payments until they equal 20 (240 payments) or 25 years (300 payments).

Don’t Leave Payments on Autopilot

If you are struggling to pay your loans, getting into an income-based program is the smart thing to do, says Persis Yu, director of the National Consumer Law Center’s Student Loan Borrower Assistance Project. But once you get back on track, don’t leave your payments on autopilot. There’s no penalty for prepaying, so step up your payments as your income grows.

Use the DOE’s repayment estimator to see what you’ll owe over time based on the student loan repayment plan you choose. Also check our interactive tool, which shows you how different payments options affect the amount you owe.

And lastly, stay on top of your paperwork. To take advantage of the forgiveness option, you’ll need documentation to show that you’ve made all of your qualifying payments. If you work in public service (teaching, or working at a nonprofit or for the government, for example) and are seeking debt cancellation through the public service loan forgiveness program, you need to file forms with your servicer showing you work for an eligible employer. We recommend doing it once per year.

Don’t depend on your student loan servicer to be on top of things. The DOE and the Consumer Financial Protection Bureau have been cracking down on servicing problems, an issue that Consumers Union, the policy and mobilization arm of Consumer Reports, has been trying to resolve, too.

Consumer Reports and other student loan advocates are also pushing to simplify the programs by creating one universal income-driven repayment plan.

“Now that the various plans are better known to the public, people are finally using these in higher numbers, and in the short term, this can be a good thing because it will prevent borrowers from falling behind on payments,” says Suzanne Martindale, staff attorney at Consumer Reports who specializes in student debt issues. “But this is a Band-Aid solution. Policymakers have created an expensive and complex loan system that fails to address the larger goal of reducing the cost of education so that all students have greater opportunities to contribute to our society and economy.”

Income-based plans aren’t likely to go away. The Obama administration has been pushing to expand the program. And in October, president-elect Donald Trump proposed a similar plan, capping monthly payments at 12.5 percent of the borrower’s income instead of 10 percent, and forgiving balances left after 15 years of payments instead of 20 to 25 years.

Income-based repayment plans “are an incredibly valuable resource for people who are having difficulty paying,” says Yu.

SOURCE: Consumer Reports, http://finance.yahoo.com/news/student-loan-repayment-plans-might-183107708.html

Scammers Top 10 List

From the classics to the innovative, this top ten list includes the most popular scams and fraud schemes of the year with some new additions to look out for in the coming months!

#10 Sweepstakes Scam: You’ve won a contest! Or the lottery! Or the Publishers Clearinghouse Sweepstakes! All you have to do to claim your prize is to pay some fees or taxes in advance so they can release your prize… This is not a new scam, but it is a perennial problem.

#9 Romance Scam: Romance scammers contact their victims through online dating websites or sometimes Facebook. They will quickly request to communicate outside of the avenue in which you met, either through personal email or text messaging. These scammers will start by asking for a small favor in order to gauge whether the victim will be likely to help in the inevitable emergency that will occur in the future and require a much larger sum of money that they will request be sent by Western Union or Money Gram.

#8 Robocall Scam: The notorious “Rachel from Cardholder Services” made a resurgence in 2016. This scam claims to be able to lower your credit card interest rates and takes personal information – including your credit card number – and then charges fees to your card. Robocalls will always give you the option to be removed from their call list by pressing a certain number. Hang up and do dot press anything! This will only confirm that there is a live person on the other end of the phone and they will keep calling back.

#7 Government Call Scam: Scammers will call claiming to be a representative from some government agency (the IRS, Medicare, etc.). They will then either inform you that you owe their agency money and request immediate payment or they need you to verify some sensitive information over the phone that they will then use to do further damage.

#6 Emergency Scam: This one is sometimes called the “grandparent scam” because it often preys on older consumers. You get a call or email from your grandchild or other relative who was injured, robbed or arrested while traveling overseas and needs money ASAP. Do not send money!!

#5 Can You Hear Me Scam: You get a call from someone who immediately asks “Can you hear me?” Their goal is to get you to answer “Yes.” These phone calls are recorded and edited to make it sound like you authorized a major purchase.

#5 Medical Alert Scam: Another one that preys on older folks. You get a call or a visit from a company claiming a concerned family member ordered you a medical alert device in case you have an emergency. They take your credit card or banking information but you never receive anything.

#4 Door-to-Door Scam: These scams vary but often include one of the following situations. Your safest course of action to avoid getting caught up in one of these scams is to not open your door to strangers.

  • Magazine sales include groups of travelling sales people who hit whole neighborhoods hard and fast offering magazine subscriptions that never get delivered.
  • Utility scams happen when fraudulent utility companies hire and train door-to-door sale representatives to come to your home and convince you they can save you money on your electricity or gas bill. They will either try to gain access to your account information to switch your service without permission, or offer low-low rates for the first couple of months then hit you with a steep price hike.
  • Alarm system scammers enter your home under the guise of upgrading your current alarm system, then negotiate you into a long term service agreement (2-5 years) that is very costly to break.

 #3 “Are You Calling Yourself?” Scam: Scammers can make a call look like it’s coming from anywhere. The latest trick puts your number in the Caller ID, which piques your curiosity and gets you to pick up the phone or return the call… and then they’ve snagged you in whatever scam they are running.

#2 Tech Support Scam: You get a call or a pop-up on your computer claiming to be from Microsoft (or Norton, or Apple) about a problem on your computer. They say if you give “tech support” access to your hard drive, they can fix it. Instead, they install malware on your computer and start stealing your personal information.

And the top Scam of the Year, because it’s just so terrifying, is:

#1 Arrest Scam: You receive an ominous phone call from someone claiming to be a police officer or government agent (often the IRS). They are coming to arrest you for overdue taxes or for skipping out on jury duty… but you can avoid it by sending them money via a prepaid debit card or wire transfer. Another variation on this is that you’ll be arrested for an overdue payday loan. Whatever the “violation,” it’s scary to be threatened with arrest, and many people pay out of fear.

These are the scams that have been proven to be successful year after year, because scammers are professionals who have tried and true techniques to swindle you for big bucks. They do things like build relationships and connections and play on your emotions to get you to make hasty decisions, and they often go through extensive measures to make themselves appear credible. Remember, they are actual pros at what they do.

Avoiding the scam rules to live by:

  • Don’t be pressured into making fast decisions.
  • Take time to research the organization. Check them out on bbb.org, search online, etc.
  • Never provide your personal information (address, date-of-birth, banking information, ID numbers) to people you do not know.
  • If you are unsure about a call or email that claims to be from your bank, utility company, etc., call the business from the number on your bill or the back of your credit card.
  • Never send money by wire transfer or prepaid debit card to someone you don’t know or haven’t met in person.
  • Never send money for an emergency situation unless you’ve been able to verify the emergency.

Scams Targeting College Students

The first year of college brings new challenges and opportunities. College opens doors for you that may be life changing, but it may also open the door to scammers that want to take advantage of you. Better Business Bureau serving Eastern Oklahoma warns college students to be aware of scams targeting unsuspecting young adults.

Here are several scams targeted at those attending college and our advice on how to avoid them:

  • Roommate/Rental scheme – If you post an ad for a roommate on Craigslist, beware of “fake roommates” who are out of the country, but can provide the rent upfront in the form of a money order. When you receive it, the amount is higher than the amount requested. You are asked to cash it and wire back the rest. This is a scam!
  • Employment – Beware of ads that pop up near campus offering jobs with “no experience necessary.” Often, these “opportunities” are bogus! If you are interviewed in a hotel lobby or required to sign a contract, or have to pay for everything, including training, travel, lodging, food, etc. associated with the job, forget it! Check out a company first at bbb.org.
  • Scholarship/Grants – Scholarship-finding services “guarantee” grants or scholarships. They sell lists to students of potential scholarship or grant opportunities. However, nearly all available financial aid comes from the federal government or individual colleges. Go to grants.gov for more information.
  • Online Shopping Deals – You see a much-wanted item for a steep discount online. One you could not usually afford. The catch? The site asks you to wire payment to them instead of using a credit card – a huge red flag. Once the money is sent, the item is never received.
  • Cheating Supplies – Students can find term papers and test questions and answers, but universities are increasingly using new software like Turnitin, fake websites, and spy cameras to track down dishonest students. Don’t cheat yourself out of learning!
  • Illegal Downloads – It may be tempting to save money by downloading free music, movies, or textbooks, but many contain spyware that can end up causing financial havoc.
  • Locksmith Scams – College students may accidently themselves out of their homes or cars. If this happens to you, you probably will use your cell phone or the local yellow pages to find a nearby locksmith. The problem is, some disreputable locksmiths will post bogus addresses in their yellow page ads to make them appear local when they’re not.

Here are a few other ploys to watch out for:

  • Credit Cards – While it is important to build credit, it is more important to maintain good credit. Many of these cards have annual fees or charge high-interest rates on purchases. Shop around for the best rate and pay off your credit card bills every month.
  • Trial Offers – From fitness club memberships to magazine subscriptions to acne medicine, diet pills, or free DVDs and CDs, know how much these products and services are going to cost you once the “Free Trial Offer” expires.
  • Safeguard Your ID – Keep your personal information, including your driver’s license, student ID, debit cards, credit cards, and bank information in a SAFE place. Be wary of any online solicitations, emails, social media sites, or phone calls asking for your personal information. NEVER give out personal information to someone you do not know.

Prevent College ID Theft

“Identity theft can affect penniless students as much or more than their parents,” said Michelle L. Corey, St. Louis BBB President and CEO. “Sometimes all thieves want is to exploit your clean credit record. By establishing good habits for monitoring and detecting fraud, students can establish healthy financial habits for the rest of their lives.”

BBB recommends that college-bound students take the following steps to fight identity theft on campus:

  • School mailboxes are not always secure and often can be accessed easily in a dorm or apartment. To combat sticky fingers in the mailroom, have sensitive mail sent to a permanent address, such as a parent’s home or a post office box.
  • Important documents should be stored under lock and key. This includes your Social Security card, passport and bank and credit card statements. Shred any paper documents that have sensitive financial information rather than just tossing them out. Also shred any credit card offers that come in the mail.
  • Never lend your credit or debit card to anyone, even if they are a friend. Just say no if your friend wants you to cosign for a loan or financing for items like a TV.
  • Make sure your computer, laptop or tablet has up-to-date antivirus and anti-spyware software. Always install any updates and patches to your computer’s operating system or browser software, which help keep your computer safe from new schemes or hacks by identity thieves online.
  • Always check your credit or debit card statements closely for any suspicious activity. The sooner you identify any potential fraud, the less you’ll suffer in the long run. Getting your statements online is more secure, but make sure you actually look at the statements.
  • When shopping on unfamiliar websites, always check the company out first with BBB. Look for a BBB Accredited Business seal along with other trust seals; click on the seals to confirm that they are legitimate.
  • Check your credit report at least once a year with all three reporting bureaus for any suspicious activity or inaccuracies. You can do this for free by visiting http://www.annualcreditreport.com.

Excerpted from: http://www.bbb.org/stlouis/news-events/news-releases/2016/07/bbb-tips-to-help-college-students-protect-against-id-theft/

New Twists on an Old Scam

Beware! Scammers are up to their old tricks in brand new ways. The Grandparents Scam has been around for years, but it seems with all of our vigilant work to spread the word about this classic, the fraudsters have adapted and thought up new ways to exploit the unyielding love you have for your grandchildren.

In the original scam the fraudster would call in a panicked state claiming to be a grandchild in trouble on vacation far away, usually in a foreign country. They wouldn’t sound like themselves, but of course that was because they were injured, a broken nose from the car accident in which they were just involved and jailed for, so they needed money to bail them out right away! They would be so embarrassed and plead with you not to tell their parents. Grandchildren hold the sweetest spot in your heart, so of course you don’t want to get them in any more trouble. You oblige and wire the $3,000 they need for bail and to cover damages. After all, you just want them home safe.

Scam artists involved in this scheme tug right at the heartstrings of caring and loving grandparents. Now we know you still love all your grandkids the same, but you’ve become so savvy to the old tricks, you’ve shared your stories, and you’ve warned your friends about what to look out for when they get these suspicious calls. Now, the scam artists have had to get more creative and are once again targeting grandparents with new twists on this old scam.

The first frightening twist involves the alleged kidnapping of a grandchild. Naturally, we would want to do anything and everything to keep our loved one’s safe, so if someone calls threatening to harm your grandchild unless you wire them the ransom money it’s tempting to spring into action, no questions asked. This is exactly what the scammers are banking on. Hang up and call the police immediately. If someone has been kidnapped you want professionals handling such a serious matter, but in the more likely event that it’s a scam you can save yourself hundreds or thousands of dollars.

The next new twist on the grandparents involves exploiting the military status of our service men and women. This tactic works so well because it is harder to determine the whereabouts or get in direct contact with someone deployed overseas. Calling your grandchild directly to confirm details of a story as we encourage you to do is a less plausible option when they are serving in the military, so it’s an excellent opportunity for scammers to convince you they are in trouble and the only way to help is to send them money immediately. As if that isn’t bad enough, these scam artists have caught on to the fact that we all know when someone asks for a wire transfer or green dot money card it sends up a big red flag. Now, they have taken to demanding cash concealed in magazines to be sent overnight to supposed legal help. Sometimes they even increase the sense of urgency by putting a six hour time limit on payments sent within the U. S.

The Federal Trade Commission has also reported scammer are calling grandparents and telling them their grandson or granddaughter has defaulted on a loan and they will either lose their job, go to jail, or something equally as bad unless a payment is made immediately. They will proceed to ask for credit card information for payment or offer other payment options such as a wire transfer or a prepaid card. There are a few important things to remember in this situation. First, unless you have co-signed a loan for the grandchild in question you are not responsible for someone else debt. In fact, it is illegal for a debt collector to even tell you about someone else’s debt, even if it is your grandchild. If you do receive one of these calls hang up! Do not confirm any personal or financial information. You may also report such calls to the Federal Trade Commission at www.ftccomplaintassistant.gov.

Even if the Grandparent Scammers are using new schemes all the old rules still apply. Screen all your calls. If you do get a call from someone claiming to be your grandchild from an unfamiliar phone number just hang up and call back to verify on their personal cell phone. Taking the few extra minutes to verify their story can save you thousands of dollars and a lot of heartache. In scenarios like the ones listed above it is best to get as many people involved as possible to deter these thieves. Continue to share your stories and pass along the information you know to raise awareness. Feel free to contact the BBB Education Foundation at 713-341-6141 if you have any questions or want to share your experience.

Tax Season Scams

It all starts with a phone call. The caller ID reads “IRS” and the agent on the other end of the line provides you with his name and badge number. He may even know personal details about you as he claims you owe back taxes, which you must pay immediately by pre-paid debit card or wire transfer before he sends local law enforcement to your home to pick you up and haul you off to jail!

When you read the above scenario you may think there is no way you’d ever fall for such a farce. We are warned year after year of scams and schemes that come along every tax season, but still these con artists continue to make victims of well-meaning taxpayers. They are professionals scammers, experts at creating a sense of urgency, and all too convincing of the threats they concoct to scare us.
Don’t fall victim to scammers calling claiming to be IRS employees. Impersonators will call, demand payment, and even threaten legal action if you refuse to cooperate in their scheme. Remember, the IRS will NEVER:
• Call to demand immediate payment—the IRS will first mail you a bill and then allow for opportunity for you to question or appeal the amount owed
• Require specific methods of payments such as a prepaid debit card
• Ask for credit or debit card numbers over the phone
• Threaten to bring in local police to have you arrested for non-payment
We have to be increasingly vigilant in this ever advancing technological age as these imposters now have more avenues than ever to swindle us out of our money and personal identifying information. The IRS has reported a new phishing scam where unsuspecting victims receive an email, apparently from the IRS, and are then lead to a bogus website resembling the official IRS website to “update your IRS e-file immediately.” Beware: these emails are not from the IRS and the websites closely resemble the legitimate site making the scam hard to detect. Look for mention of USA.gov or IRSgov (without a dot between “IRS” and “gov”) in the message.
Though the IRS offers a completely safe and convenient e-filing option for us to file our taxes, they will NOT initiate contact with taxpayers by email to request person or financial information. If you suspect you are receiving these messages do not respond or click on any links! Instead, you can forward these emails directly to the IRS at phishing@irs.gov.
For free tax help and preparation you can contact the Volunteer Income Tax Assistance (VITA) program help line at 800-906-9887 to find a location nearest you.
If you are unsure about the authenticity of any call or email you receive this tax season please don’t hesitate to call us here at the BBB at 713-331-6141.

How Do People Get My Information?

By Barbara Parrott McGinity, LMSW

This is one of the most frequent questions I get from people, and my response to is always “we give it to them.” Here are some examples of the many different ways we freely provide information to scam artists.

1) Endless robo calls asking you to press 1 for more information or press 2 to get off their list. The typical reaction is to press 2 to get off the list, but in reality you are confirming that this is a good phone number with someone who answers the phone and follows instructions. Your number is added to a list then sold to the actual scammer who makes a live call to someone they perceive as a potential victim.

2) Legitimate looking spam offering the ability to unsubscribe. When you click that option and put in your email address you are actually putting yourself on a list to get alot of unsolicited offers that never stop. The other trick is receiving emails that purport to be from UPS or Fed Ex, referencing a failed delivery, and you have to click “here” for more information. The bottom line is never click on any link in an email until you have verified the validity of the source.

3) The Internet should come with a the daily warning “Use with Caution.” We surf and search for information but schemers are also searching for us. Far too often, when people are looking for specific information on issues related to insurance quotes or home equity loans and mortgages, they are asked to complete information in a pop up window to be allowed access to the information. Never put in a phone number or other personal information in a pop up window or on a website until you understand how this information will be used.

3) Using Craigslist to trick people into providing contact information. You have an item for sale and receive an email from an interested party asking if you will send your private email address for communication purposes. If you are familiar with Craigslist there is no reason not to use their encrypted service. So why are they asking for your email? They want it to put on a list to sell to spammers and scammers.

4) Then there is the old fashion way, reaching folks via mail. To find individuals vulnerable to sweepstakes scams letters are sent out promising riches for just a return of $10. The group that sends in $10 gets a letter asking for $20. Then the individuals who sent $20 are compiled into a list sold to telemarketers who then call the victims on the phone, gain their confidence, and start asking for money to get their millions.

It is important to stop and think before responding to any situation that requires you to provide any personal information. It will come back in some way you are likely to regret.