Student Loan Defaults: How to Stop Them
NEW YORK ( MainStreet) With the federal government back in business following last month's shutdown, the Obama administration is revisiting its campaign to make college more affordable while emphasizing the importance of staying current on student loans. On Monday, the Office of Federal Student Aid (FSA), a performance-based organization within the Department of Education that dispenses $150 billion in aid and loans annually, unveiled an outreach campaign to groups of federal student loan borrowers to make sure they understand their repayment options. Last weekend, the FSA began a targeted email blast to borrowers designed to school them about the best repayment plans.
"Reaching out to borrowers to ensure that they have the information they need to manage their student loan debt is an important part of the administration's proposals to improve college value and affordability," said Secretary of Education Arne Duncan. "Thanks to this outreach, coupled with ongoing outreach provided by student loan servicers, borrowers have the opportunity to learn more about their options to lower monthly loan payments."
Duncan did not comment about the existing performance of student loan servicersand whether or not they've been falling down on the job or to what extent borrowers have been ill-served by them. New burdens may be placed on servicers to prove that they can hold up their end. Last month the Consumer Financial Protection Bureau released a report describing how the payment processing policies of private student lenders and loan servicers may thwart borrowers looking to more quickly close out their loans.
"Borrowers do not always seem to be aware of their repayment options," said Mark Kantrowitz, executive vice president and publisher of Edvisor's Network, a group of Websites that provides intelligence on student loans. "Sometimes this is due to a lack of transparency by the servicers."
By the same token, the awareness of income-driven repayment plans as a solution to borrower delinquencies and defaults is clearly in the Department of Education's wheelhouseas is getting the word out about them.
In addition to last weekend's e-mail blast, the FSA plans to reach recent college grads through Youtube, Facebook, Twitter. How ED would identify borrowers that use social media was unclear, but those with above-average debts or with loans in deferment or forbearance were preferred targets. About 3.5 million borrowers could expect to get the government's message.
In addition to contacting groups of borrowers, the FSA will soon launch a "one-stop shop" financial aid toolkit aimed at guidance counselors and other advisers who assist students in the process financing their post-secondary school educations.
The toolkit will include resources covering the entire financial aid lifecycle, from applying for financial aid to repaying loans. The toolkit will also offer professional development information such as training opportunities and resources for self-instruction. More information about the toolkit will be provided closer to its launch date later this year.