The U.S. Has A Helpful Student Loan Repayment Program, But No One’s Using It
Career College Central summary:
New data shows many students aren’t taking advantage of the repayment options the government has made available for struggling borrowers who have taken out federal instead of private student loans.
The Consumer Financial Protection Bureau’s student loan ombudsman, Rohit Chopra, posted an interesting breakdown of the $1 trillion in outstanding federal student loans. He found two-thirds of all borrowers are on the standard 10-year payment plan; the remaining third are in one of the special plans that are supposed to help borrowers manage their monthly payments. About two-thirds of those people are in plans that either extend the term of their loan or start the monthly payments small but increase them over time, or some combination of those options. They can make loans more affordable in the short term, but they increase how much total interest a borrower pays over the life of the loan.
Just 3 out of 10 borrowers in the repayment plans are getting the kind of help that pegs a borrower’s payment to his or her monthly income. Income-based repayment plans are generally praised by student advocates for making loans affordable and because they forgive the remaining balance after 10, 20, or 25 years, depending on the program. Chopra found that given the average amount borrowers in each program owed, “it’s possible that many borrowers in plans not based on income might be better off with an income-based plan.”
So why aren’t more students using the IBR plans? Chopra says it’s because borrowers don’t know about them and enrollment isn’t as easy as it could be.
Click through for full article content.