Student Loans in the News: Common Repayment Mistakes
A brief round-up of recent articles and blog posts that discuss current student loan debates and data
About the author: Kevin Mahoney, CFP® is a fee-only financial advisor in Washington, D.C. Kevin's work with his clients focuses on paying off student loans, buying a house, investing savings, and budgeting. Kevin is the founder & CEO of Illumint, a virtual financial planning firm specifically designed to help couples and young families with their financial decisions.
I see clients make the same 6 mistakes with student loans
Author Marguerita Cheng writes:
"Choosing the wrong repayment plan
If you have federal loans, there are 11 student loan repayment plans to choose from. Which one is best for you depends on your financial goals. If you want to pay less interest, the standard 10-year repayment option is best. Refinancing your federal loan into a private loan can also save you money on interest.
But if you want student loan forgiveness, you must be on a qualifying income-driven repayment plan. If you're not on the right program, your loans won't be eligible for forgiveness. Make sure you understand your options before you pick a plan.
Cosigning a loan without understanding the consequences
You might not think twice about cosigning a loan for your son or daughter to attend school. But there are consequences you may not know about when you cosign a loan. Even if your child is responsible, you could be on the hook for repaying the entire balance if they don't make the payments. It could also affect your ability to buy a house or take out a loan for any reason because it increases your debt-to-income ratio.
If you decide to cosign a student loan, ask about a cosigner release. Some private lenders will remove you as a cosigner if the primary borrower meets specific requirements, such as making 12 consecutive on-time payments and passing a credit review."
[Read the entire article over at Business Insider]
Law Will Ease Access to Affordable Student Loan Repayment if Implemented Effectively
The Pew Charitable Trusts
Author Sarah Sattelmeyer writes:
"Changes intended to help federal student loan borrowers enroll and remain in income-driven repayment (IDR) plans are a less frequently discussed aspect of a significant higher education bill enacted late last year. But the updated procedures could help millions better navigate the system for repaying their higher education debt—depending on how the law is implemented.
The plans, under which monthly payments are calculated based on borrowers’ incomes and family sizes, are often more affordable than other options, and when enrolled, borrowers are less likely to default.
More broadly, legislative analysts estimate that the Fostering Undergraduate Talent by Unlocking Resources for Education (FUTURE) Act could save taxpayers $2.8 billion over the next decade. The law also provides permanent funding for Historically Black Colleges and Universities and other Minority Servicing Institutions. In addition, it streamlines the Free Application for Federal Student Aid (FAFSA) that prospective and current students must submit annually to access federal student aid and federal student loans as well as the application process for loan discharges for individuals who are totally and permanently disabled."
How to Make a Student Loan Complaint That Gets Results
Author Anna Helhoski writes:
"You’ll see results fastest by contacting your private lender or federal loan servicer first, says Betsy Mayotte, president and founder of the Institute of Student Loan Advisors.
Reach out to the lender or servicer’s highest office of customer service, whether that’s a consumer advocate, ombudsman or claims department. Its general call center might not give you the response you’re looking for or have the authority to make account changes.
Send an email first to the company’s general customer service address, which will get your message to the right person, says Mayotte. Written correspondence ensures you have a paper trail. A phone call might seem easier, but it’s more difficult to track interactions with your lender or servicer.
When you make a complaint, document everything and keep your narrative consistent, experts say. It also helps to be clear about what you’re asking for, says Bonnie Latreille, director of research and advocacy at the nonprofit Student Borrower Protection Center.
'It’s really easy for any company to send off a form letter,' she adds. 'But if a borrower says, ‘I have called and sought relief, and you advertise relief on your website and I want to know what’s available to me,’ then the servicer needs to supply what plans you’re eligible for and a copy of the applications.'"
[Read the entire article over at Nerd Wallet]