Getting loans for college is an easy process. Just sign on the dotted line and attend classes. Repayment, though, can be a thorny issue. Colleges do a poor job of telling you what you need to know.
You may also encounter some roadblocks when you repay your loans. You may not have enough income to cover monthly payments. Or you may want to go back to school to earn a graduate degree. And when you go to repay your loan, the company servicing your loan may do an awful job in steering you to more affordable repayment options.
According to a recent report* by the Consumer Financial Protection Bureau (CFPB), millions of graduates are having problems repaying their loans because of difficulties dealing with servicing companies. Here’s what one borrower told the CFPB, which had collected some 30,000 complaints on these firms:
"I have a loan with [servicer] and I have not been given any help dealing with my payment options. I have filled out applications for an [income-based repayment plan] and forbearance. Customer service is constantly giving me false information and not helping me to get my payments lowered…Please, help me. I am trying hard not to allow my loans to go into default. I am not trying to ignore my loans but how can I pay a $2,000 monthly payment. They are not helping me to resolve this payment to a payment that I can afford."
What can you do? Know your rights, for one thing. A loan servicer must respond to your requests for more affordable income-based repayment plans. Under the federal loan program, you have an array of options that can help you repay loans. Here are some of the most common issues and how they can be addressed:
Federal Loans Made by Private Lenders.
While private loans aren't subject to the same generous repayment provisions under the federal program, anything involving a federal loan entitles you to some slack. You can base your payments on your income or gradually increase loan payments. You can even get a break if you're disabled, out of work or going back to school.
"Borrowers with these loans generally have a right to enroll in payment plans that set their monthly payment based on their income," the CFPB found. "The complaints we received show that some student loan borrowers had trouble getting accurate information, having paperwork processed on time and staying on track once they were able to enroll."
Assert your right to access repayment options. Keep on it.
Don't Fall Into Default, Even if You're Not Making Payments.
The CFPB found that one in five of those surveyed were in this no man's land of not making payments, yet not into default status, which will trigger a collection process.
All told, some four million borrowers are in default. Don't fall prey to collection agencies. Get into a workable repayment program before that happens. You don't want to get your credit rating downgraded. That will hurt your ability to apply for credit and get the lowest rates for vehicle and home loans.
Educate Yourself About the Repayment Options.
Again, the federal program can change the terms of your loan. You can also consolidate loans to save money and even qualify for forgiveness if you're in a public service profession.
While the government's site on repayment isn't the most user friendly, it's a good place to start. Servicers may not tell you about your options, nor will colleges in many cases, so you have to be proactive and avoid the situation where you get in over your head on payments and don't even explore your alternatives.
"We found that, despite the widespread availability of these plans, the overwhelming majority of borrowers in our sample were not enrolled," the CFPB stated. Don't be uninformed, get started today.