If only the burden of repaying student loans could be as simple as taking them out. But the truth is: it’s a difficult process which millions of college grads must come to grips with. Unfortunately, many borrowers fail to manage their student loans successfully. Records show that of the $1.2 trillion student loan debt, about 30% is in forbearance, deferment, or default. Forbearance and deferment are options used by borrowers when they want to avoid making timely repayment without getting into default. However, interest accumulates and in most cases added to the principal balance.
This corresponds to a report released by the Consumer Finance Protection Bureau. The report indicates that a staggering 41% of the 5,300 private student loan complaints which the bureau received from October 2013 to September 2014 came from borrowers who moan of their inability to pay their loan.
Why are student loans not being paid back? A recent campaign led by CFPB shows us why. The CFPB asked borrowers to tell their own Student Debt stress Story and here’s a summary of their report.
Problems Accessing to Benefits
Borrowers enrolled in income-driven payment plans only to find out later that it would cost them a huge sum of money in unexpected payments. Among these problems are delays in processing and inaccurate information from customer service employees. Also, borrowers experienced problems preventing them from maintaining low payments under these plans, even after submitting all the required paperwork.
Barriers in processing often cause borrowers to fall behind. Problems usually arise when borrowers miss a payment or when loans are transferred from one servicer to another.
Customer Service Issues
Thousands of private lenders fail to provide a genuinely helpful customer service. Most customer service personnel of private lenders are so unsympathetic or tied to a script that majority of borrowers is complaining. Although they’re fully aware that being underemployed or unemployed doesn’t give them the reason not to pay back their loans, they’re demanding for some empathy.
Lack of Proper Communication
In paying any type of loan, proper communication between the lender and the borrower is crucial. While some student loan borrowers tend to shrink back whenever they fail to comply with their repayment terms, it is often the case that lenders fail to provide their clients with proper information necessary for them to pay down their debt. Borrowers protest of being left in the dark when they reach out with inquiries.
Payoff and Prepayment Problems
Many borrowers whine of the difficulties they face even when they tried to pay off their loans completely or pay down their student debt faster by paying more than their required monthly payments. In some cases, borrowers even incurred additional charges for paying their loans more quickly.
New Loan Servicer
When companies transfer the loans to new servicers, they sometimes fail to inform their borrowers. As a result, payments don’t reach their correct destinations, leading to lost payments and late fees.
How Unpaid Student Debt Can Ruin One’s Life
As the difficulty in the payment process remains unsolved, more borrowers are starting to put off their payment plans. But when millions of young graduates go on default, their personal credit ratings also crash down making them unlikely prospects for employers. In fact, defaulting on a student loan disqualifies them from holding some government jobs. Even those who are currently employed are at risk of losing their jobs once they default because their professional license can be suspended as a punishment.
Regrettably, college debt is not only wearing out the finances of millions of Americans. It’s also taking a toll on their health, personal relationships, and emotional well-being. At StudentLoanJustce.org, a website where borrowers share their sad stories about living with student loans, many talk about suffering from panic attacks or a mild heart attack due to the stress of college debt. Some experience migraines, sleepless nights and even contemplate on committing suicide.
Unless the government acts immediately on this mounting student loan debt problem, it will continue to affect a generation of distressed borrowers in particular, and the national economy in general. There is reason to believe that the government must act in accordance with the purpose of StudentLoanJustce.org that asserts, “We are a grass roots group seeking the swift return of standard bankruptcy protections and other consumer protections to all student loans in the U.S.”