GAO Report: Few Student Loan Borrowers Know About Best Repayment Plans

Student Loan Borrowers
Sen. Patty Murray, D-Wash., speaks at a press conference about student loan debt, fair pay for women and the Student Load Refinance Bill on Capitol Hill in June 2014. Murray, the ranking member on the Senate Education Committee, recently said a study by the General Accountability Office about student loan repayment options underscores the need for income-driven repayment plans. Photo by Kevin Dietsch/UPI | License Photo

WASHINGTON, Sept. 19 (UPI) — Millions of struggling student loan borrowers may be missing out on lower payment options because they’re not being told about plans that throttle monthly payments, a federal report said.

The Government Accountability Office said the Department of Education has not done enough to make borrowers aware of so-called income-based repayment plans despite the Obama administration’s push to give students more options for repayingtheir loans to avoid default.

The companies contracted to handle payments and help people avoid default — including Great Lakes, Navient and Nelnet — are not doing enough to tell borrowers about their repayment options, the GAO said. While the information is available on their websites, borrowers have to actively seek it out. Even when servicers contact borrowers behind in payments to discuss options, the information is inconsistent.

“Without such information, borrowers who are unaware of these plans may miss the opportunity to reduce their risk of delinquency or default,” the report said.

The flexible repayment plans are designed to keep students from defaulting on their loans, something that happens to one in seven borrowers within three years of beginning repayments. Some $103 billion of the more than $1 trillion in outstanding student loan debt is in default, the Department of Education said. Income plans that include Income-Based Repayment and Pay As You Earn allows enrollees to pay as little as nothing and still remain current on their debt.

Sen. Patty Murray, D-Wash., the ranking member on the Senate Education Committee, who commissioned the GAO study, said the report highlights the importance of borrower relief options despite conservative criticism the plans are giveaways to wealthy graduates.

“While some of my Republican colleagues have attacked these important debt relief options and targeted them for short-sighted budget cuts,” she said, “this report shows that not only are these plans serving the individuals who need the most help, we should be expanding efforts to help borrowers who are struggling under the crushing burden of student debt.”

At the same time, policymakers continue to grapple with keeping borrowers enrolled in the programs. Scores of borrowers fall out of the income-driven plans for failing to verify their income every year. Recently, the Consumer Financial Protection Bureau asked servicers to explain how borrowers stay informed about the program.

“When borrowers don’t recertify on time, their payments will snap back to the amount they would have owed under a standard 10-year repayment plan — a jump of hundreds of dollars per month, in many cases,” said Seth Frotman, the CFPB’s acting student loan ombudsman. “This can be a shock to those already struggling to make these payments”

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