The scam surge arrives as 7.7 million federal student loan borrowers are now in default on roughly $180 billion in debt, according to Department of Education data released in March. An additional four million borrowers are at least 30 days delinquent, with 1.8 million in late-stage delinquency and on track to default within months. About one in four of the nation's 43 million federal student loan borrowers are behind on payments — the highest rate since tracking began nearly a decade ago. (TSLHG)
The FTC just shut down an $8.8M impersonation scheme
The Federal Trade Commission obtained a temporary restraining order in mid-April against an alleged scheme run by NERD Solutions Inc. and ED REF Inc., which the agency said collected at least $8.8 million from borrowers by impersonating the Department of Education and charging illegal upfront fees as high as $1,400. (FTC)
Consumer advocates say the enforcement landscape has weakened at exactly the wrong moment.
Federal oversight has been gutted
In April 2025, the CFPB's chief legal officer, Mark Paoletta, issued an internal memo directing the agency to "deprioritize" oversight of student loans, among other areas, and cut supervisory examinations by 50 percent. Business Insider, which first obtained the memo, reported that the agency would shift resources away from monitoring companies toward returning funds already collected. (Consumer Finance Monitor)
At the Department of Education, staffing at Federal Student Aid fell 46 percent — from 1,433 to 777 employees — between January and December 2025, according to a March 2026 Government Accountability Office report. The GAO found that the department stopped evaluating loan servicers "on accuracy and call quality" in February 2025, and lifted financial penalties for underperforming servicers. (Inside Higher Ed)
AI is supercharging the fraud
Experts warn that advances in artificial intelligence are accelerating the problem. AI-powered voice cloning now requires as little as three seconds of audio to generate a convincing replica of a human voice, according to McAfee research cited in a Vectra AI analysis. AI scams surged 1,210 percent in 2025, and autonomous "scam agents" can now run fully automated fraud call centers, combining synthetic voices with large language models to engage and screen potential victims at scale. Senator Maggie Hassan in April pressed AI voice cloning companies to take steps to prevent exploitation by scammers, writing that digital fraud now "surpasses the global drug trade as an illicit industry." (Vectra AI)
How to spot a student loan scam
Real federal student loan help is always free. If any of these red flags appear, walk away:
- Upfront fees for "loan forgiveness," "consolidation," or "Department of Education programs." The government never charges to enroll you in repayment plans, consolidation, or forgiveness.
- Pressure tactics — "act now," "limited spots," "your loans are about to be reported." Real federal programs don't have artificial deadlines.
- Requests for your FSA ID (your StudentAid.gov login). Never give this to a third party. With it, a scammer can change your address, switch your servicer, and reroute correspondence so you don't see what's happening.
- Promises of total forgiveness in exchange for a fee. No company can deliver discharge that isn't already available to you for free.
- Calls or texts from "the Department of Education" asking for payment or personal information. The Department doesn't cold-call borrowers for fees.
- AI-cloned voices of people you know asking you to "help with their student loans." Hang up and call the person back at a number you already have.
Where to get real help
- StudentAid.gov — the only official federal source for repayment plans, consolidation, IDR, and PSLF.
- Your loan servicer — listed on your StudentAid.gov dashboard. They handle payments and plan changes at no cost.
- A nonprofit credit counselor approved by the Department of Justice, or an attorney licensed in your state.
- Bankruptcy counsel — if your loans truly create undue hardship, federal student loans can sometimes be discharged in bankruptcy under the 2022 DOJ attestation process.
"It's a great time if you're in the scam business," the Hechinger Report noted in its investigation. (Hechinger Report)
If you're being pressured by a debt-relief company, contacted by someone claiming to be from the Department of Education, or considering bankruptcy as a way to manage student loans, talk to a licensed attorney before paying anyone a dime. Steven C. Fraser, Esq. is admitted in Florida (FL Bar No. 625825) and the District of Columbia (DC Bar No. 460026) and handles consumer protection and bankruptcy matters in both jurisdictions. Schedule a free consultation or call 877-862-7188.