Nonprofit credit, student loan counseling agency helps borrowers
navigate repayment process; Reveals options servicers may not tell
PHOENIX–(BUSINESS WIRE)–With student loan debt reaching $1.26 trillion and affecting 43.3
million Americans, it’s no wonder many borrowers are falling behind. In
fact, the Education Department reports more than 40 percent of those who
borrowed from the government’s main student-loan program aren’t making
payments or are delinquent.
“The long-term impacts of student loan default and delinquency cannot be
overstated, but there is hope,” said Sarah Hamilton, student loan
supervisor for Take Charge America, national
nonprofit credit and student loan counseling agency. “The trick is
to ensure you’re in the right repayment program, but this is easier said
than done. Loan servicers are in the business of collecting payment –
not educating borrowers.”
Hamilton details eight repayment considerations loan servicers may not
Multiple loans: Loan servicers only advise on the balances they
hold. If you have multiple loans, your servicer will focus only on
their individual loan without regard to other debts.
Deferment/forbearance: Your servicer may or may not know this,
but you should use deferment or forbearance only as long as necessary
– and only if you have no other options – bearing in mind you’re only
allowed a total of 36 months over the life of your loan. Also, know
that interest continues to accrue for certain types of loans in
deferment or forbearance.
Federal loan repayment options: Servicers’ first job is to
collect on debt, so they may not inform borrowers about options for
lowering their monthly payment including income-driven repayment or
loan consolidation. It’s wise to consult a nonprofit student loan
counselor to understand your options.
Tax status: Married borrowers who file their taxes jointly may
be at a disadvantage when it comes to loan repayment. Monthly payments
for income-driven plans are based on income; a joint tax return will
reflect your entire household income and may result in a higher
payment. If you’re “married filing separate,” your payment will be
based on your income alone. Your loan servicer may not know what’s
best, but your tax preparer can advise you.
Family size: Monthly payments for income-based plans take your
family size into consideration – but this isn’t necessarily based on
the family size you claim on your taxes. Even borrowers who claim
children every other year can include their dependents when applying
for a repayment plan. Your loan servicer may not know this – or may
not tell you – as family size will bring down your payment.
Parent PLUS Federal Loans: Your only repayment alternative for
parent loans is an income-contingent plan, which sets your monthly
payment at 20 percent of your discretionary income. Your servicer may
not know it’s best to leave your Parent PLUS Loan(s) out of your
consolidation so you don’t limit repayment options.
Consolidation: This may be your best repayment option, but your
servicer may not recommend you consolidate your loans, or tell you
that all past-due balances become current as soon as you consolidate.
Also, your servicer may not inform you that consolidation could allow
you to qualify for additional repayment and forgiveness options that
your individual loans may not qualify for.
Loan forgiveness: If you’re a teacher, work in nonprofit or
hold a government post, you may be eligible for loan forgiveness. It’s
unlikely your servicer will ask about your employment, so if you don’t
know about this option, you may miss out on the opportunity altogether.
Borrowers seeking more information about student loan repayment may
visit Take Charge America at studentloans.takechargeamerica.org
or call (877) 784-2008.
About Take Charge America, Inc.
Founded in 1987, Take Charge America, Inc. is a nonprofit agency
offering financial education and counseling services including credit
counseling, debt management, student loan counseling, housing counseling
and bankruptcy counseling. It has helped more than 1.6 million consumers
nationwide manage their personal finances and debts. To learn more,
or call (888) 822-9193.
Andrea Aker, 602-339-7339