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There are multiple types of mistakes you could make while repaying your federal student loans. You could make late payments or pay the wrong amount. Another common mistake is not utilizing income-based repayment programs while experiencing financial hardship. However, you should also be aware that there are mistakes you could make while talking with your loan servicer. These are companies contracted by the Department of Education to collect payments on loans and answer inquiries. There are general mistakes and major mistakes you could make with your student loan servicer. Forgetting to update your address information may not be a big deal if your servicer has a copy of your email or phone number. More serious mistakes could cost you hundreds or even thousands of dollars. Mistake #1: Not Keeping Records Student loan servicers are notorious for making mistakes. Borrowers have reported their servicers lost paperwork, applied the incorrect amount for…
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The Consumer Financial Protection Bureau (CFPB) has accused student loan servicers of failing to enroll borrowers into income-based repayment programs. As a result, borrowers are paying more than they have to and defaults have increased. You may have multiple options to lower student loan payments. Income-driven repayment programs tie monthly payments to a percentage of your discretionary income. Your options for participating in these programs vary depending on the types of loans you have and when they were dispersed. The first step to seeking lower payments is to use the Department of Education’s National Student Loan Data System (also known as the NSLDS). After logging in, you should see the types of loans you carry and information on your loan servicers. More details may be available on the top portion of your Master Promissory Note (MPN) for your loans. What Are the Eligibility Requirements for the IBR Program? There are…
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Federal student loans are held by millions of people in the United States. However, the default rates on these loans continue to increase. In fact, the Brookings Institution argues that nearly 40 percent of federal loan borrowers could default by 2023. What many borrowers may not realize is that federal student loans have multiple repayment programs and tools that can prevent default. There are also loan forgiveness options for federal student loans. When attorneys Neil Sader and Michael Wambolt penned an article for Primerus Paradigm on federal loans, they emphasized that “what you owe is less important than what you know.” You must know which types of federal loans you carry to take advantage of these programs. Using the National Student Loan Data System The Department of Education’s Federal Student Aid Office (FSA) maintains the National Student Loan Data System (NSLDS). You can access your federal student loan data by…
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Former graduates who are suffering with excessive federal student loan debt might be unaware of beneficial repayment options. In fact, we recently wrote a blog discussing why it is so important to know what student loan repayment options are available, and how it is wrong of loan servicers to hide this information from graduates. Graduates with federal loans (Direct loans) may also be unaware it is possible to enroll in multiple repayment programs. Among the most helpful repayment options are the Revised Pay As You Earn (also known as REPAYE) and Public Service Loan Forgiveness (PSLF) programs. How Does REPAYE Help Student Loan Payments? REPAYE was only recently introduced by the U.S. Department of Education to expand income-based repayment to 5 million borrowers. To help borrowers with excessive debt and low earnings, REPAYE caps monthly student loan payments at 10 percent of discretionary income. For borrowers who used loans for…
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