Income-based student loan repayment plans underused by struggling borrowers
With outstanding student debt now topping $1.2 trillion, it’s extremely important for students to understand their repayment options and take advantage of relief programs to avoid defaulting on their student loans and hurting their credit.
But according to ThinkProgress, students aren’t taking advantage of these programs. While one in eight student debtholders is in default, just three percent are enrolled in the income-based plans offered by the Department of Education.
Students not taking advantage of altenative repayment programs
According to a report from the Huffington Post, new Department of Education data shows that as many student debtholders defaulted on their loans as enrolled in three income-based student loan repayment programs.
These programs allow struggling borrowers to pay a reduced amount every month to avoid going into default. But students who don’t enroll often end up falling behind on payments, having their interest compounded and damaging their credit by not paying their student loan bills.
Student loan servicers may be to blame
Why aren’t students enrolling these programs? While some blame borrowers for not seeking out options, others say student loan servicers are at fault for not properly educating borrowers about their eligibility for certain programs.
Sallie Mae, the largest loan servicer for the Department of Education, has been accused of “unfair or deceptive” practices by the Federal Deposit Insurance Corporation for allowing millions of borrowers who are eligible for loan forgiveness or alternative repayment plans to default on their loans. Loan servicers often make money off of borrowers who default because of the high fees they charge for late payments.
Sallie Mae says it posts information about income-based repayment in various places on its website and fields 50,000 calls per month about income-based repayment programs, but it has no contractual obligation to advertise income-based repayment to struggling borrowers.
Help with student loan repayment
It’s important to choose a repayment plan that allows you to manage your payments without falling behind. We work with student loan borrowers and help them enroll in the best repayment plan for their situation so they can afford their monthly payments.
If you need help figuring out which plan is best for you and setting up a repayment schedule, give us a call at 1-888-234-3907 or send us a message.
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