Denied! The Income-Driven Repayment Plan Story
“Generally, processing your application should take no more than two weeks. However, many borrowers have told us that their applications sit under review for months at a time.”
Recently, the Consumer Financial Protection Bureau found that some of the federal student loan servicers are denying borrowers’ applications for income-driven repayment plans or just failing to process them correctly, if at all. The purpose of income-driven repayment plans is to help borrowers by capping their monthly payment based on their income.
Depending on your loans after 20 or 25 years of qualified payments, any unpaid balance of those loans will be forgiven under an income-driven repayment plan. “Generally, processing your application should take no more than two weeks. However, many borrowers have told us that their applications sit under review for months at a time.” Said Seth Frotman, CFPB ombudsman. Borrowers not being about to get into these plans when they need it sets up a chain reaction for those with financial woes. Standard repayment is typically higher for lower income borrowers under IDR plans. If borrowers who need to be in an IDR plan can’t get into one, it is easy to fall behind on payments and default. In fact, currently, 40% of borrowers aren’t paying their loans, according to the Department of Education.
“Income-driven repayment won’t be the best choice for every borrower, but it’s essential that every borrower knows that IDR is an option,” said Lauren Asher, president of the nonprofit Institute for College Access & Success. She said that the CFPB report how important it is for student loan servicers to explain all options for struggling borrowers instead of the current common practice of just putting them into a forbearance. While forbearance can be a useful tool, it is not for helping low-income borrowers who cannot afford their monthly payments in the long term.
The CFPB continues to fight in favor of borrowers their report showed other issues happening among the student loan servicers. Aside from where maybe they don’t disclose all the information they can, they have been cited misleading borrowers who pay their loans in advance, taking payments higher than the due amount and counting it as a credit for the next month’s payment instead of putting it towards the principal amount, or just system errors that put up unnecessary roadblocks for borrowers trying to file paperwork or make payments. Surely, there are some borrowers who are irresponsible but with reports like these – not even borrowers active in the system can get the help they are entitled to.
What can you do if you feel you should qualify for help?
Have you tried to get into an income-driven repayment plan but got denied? Or do you constantly feel stress and frustration regarding your student loan payment? Click here to see what help might be available. Our services could help get back on track.
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