Daily national headlines attest to the reality that student loan debt is a significant and often financially debilitating burden for many consumers of all ages. Loan delinquencies and defaults damage consumers’ credit scores and affect their ability to qualify for mortgages, automobile loans and other credit products, as well as interfering with their ability to adequately save for retirement.
In a recent speech given at the University of Maryland-Baltimore County, Deputy Treasury Secretary Sarah Bloom Raskin questioned whether student loan borrowers were getting the information they needed to avoid falling behind in their payments, and why borrowers were unable to enroll in loan modification programs to avoid default. Further illustrating the fact that income-based repayment programs – which are designed to help borrowers avoid default – are underutilized, the Chronicle of Higher Education in June 2014 noted that of the 17.5 million borrowers in repayment, only 2.2 million are enrolled in income-based repayment plans.
CEFC’s Student Loan Debt Repayment Counseling pilot program has been effective in helping financially distressed borrowers learn about their available federal loan repayment options and the eligibility requirements to enroll in a repayment program tied to the borrower’s current income.
Its impact on borrowers has been significant as indicated by a third-party survey of borrowers counseled March 1 to September 30, 2013. Major findings include:
- The vast majority (93 percent) of borrowers responded that their federal loan payments were too high for their income, prompting their decision to get counseling.
- BEFORE counseling, only 37 percent of borrowers knew about repayment options available to federal borrowers.
- AFTER counseling:
- Most borrowers (93 percent) knew that they may qualify for federal student loan repayment options. Nearly 54 percent of borrowers responded that they had qualified for a lower monthly repayment amount and changed their federal student loan repayment plan.
- Two-thirds (67 percent) of borrowers responded they were making progress in lowering their monthly student loan payments, with more than half (54 percent) responding they were able to find a less costly plan to repay their student loans than their current plan as a result of the counseling.
- Nearly three-quarters (72 percent) of borrowers reported that the counseling session and their interaction with the counselor gave them increased confidence and enhanced their sense of control of their student loan debt.