Struggling borrowers could use a Playbook to pay back student loans

Tuesday, May 17, 2016

 

Almost 70 percent of student borrowers who have defaulted on their federal student loans could have qualified for income-driven repayment plans and avoided the high fees, damaged credit and other repercussions of failing to repay a student loan on time.

To assist these borrowers, the Consumer Financial Protection Bureau (CFPB) and the Department of Education have unveiled plans to provide a personalized guide to student loan repayment options called the Payback Playbook.

The Payback Playbook will provide borrowers with a snapshot of the different repayment options when they log on to their student loan account online, open their monthly bill or receive an email from their loan servicer.

Information on the various repayment choices could provide borrowers with significant savings on monthly student loan payments and ultimately help them avoid default. However, the options that reduce monthly payments could increase the total cost of the loan over time.

Borrowers will be able to compare the costs of a fixed repayment plan to a graduated plan that spreads smaller payments out over a longer time. Reducing payments could increase the cost of the loan over time.

Loan servicers will provide borrowers with personalized loan information including the number of payments left on the life of the loan, monthly payment amounts and how those payments could grow over time. The Payback Playbook also provides borrowers with updated information when their plans or circumstances change so they can keep on top of their payments. 

The CFPB and the Department of Education are seeking public feedback to design the most useful tool. They want to know:

  • How will you better evaluate your repayment options if the tool shows your likely payments based on actual income?
  • When is the best time to receive personalized payback information – during the grace period or repayment?
  • How could this tool better provide you with this important information?

Send your comments on the Payback Playbook to the CFPB. Deadline is June 12.

 
 
 

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