An overwhelming majority of college students report that they do not feel prepared to repay their student loans.
When surveyed, 90% of students felt they lacked the necessary information and means to pay back their loans. The survey was conducted by the companies EverFi and Higher One, both of which focus on higher education.
“Students most often cited their desire to have easy access to their loan balances, a better understanding of loan repayment options and help with making a repayment plan,” the survey found. Analysts believe that if students have direct access to their amount of debt and repayment plans, they will make better decisions.
As a solution, the Department of Education has announced its plan to reform the way monthly payments are collected and how collection companies are regulated. The department intends to provide borrowers with a web portal to making payments rather than forcing them to engage with a variety of loan services. There will also be greater oversight over the 25 agencies that collect student debt.
“This year, our goal is to build a new state-of-the-art loan servicing system – one that creates incentives and guidelines that support a more user-friendly single online loan management platform with high-quality, one-on-one customer service that provides the help and guidance borrowers need when they have questions or their circumstances change,” the Department said in a statement.
According to Amy R. Connolly of the website UPI, the Federal Student Aid office annually distributes more than $100 billion in new aid to 14 million postsecondary students and their families. Currently, outstanding student loan debt amounts to a collective $1.3 trillion, with $103 billion of it in default. Borrowers are struggling to repay their loans as a result of growing balances and under-employment.
Matt Lehrich, the Director of Communications at the U.S. Department of Education, writes that the Obama administration has fought hard to help borrowers keep their student loan payments at manageable levels. For example, regardless of one’s employment status, an individual will never have to pay more than 10% of his or her monthly income on federal student loans.
There also exist many misperceptions about the consequences of loan delinquency. Some students believe that a failure to repay loans could lead to imprisonment. While missed payments will damage an individual’s credit score, it will — unequivocally — never lead to jail time. Additionally, the Department of Education will work with borrowers intensively to design options to get them back on track.
Only if every collection method fails and there seems to exist some sort of intent exhibited by the student to avoid payments will the issue be turned to the Department of Justice. It’s worth mentioning that less than one-tenth of one percent of all borrowers are faced with litigation procedures.
Interestingly, Anthony Hennen, a writer for the website RedAlertPolitics, reports that millennials who don’t go to college will have even more trouble picking up the necessary financial knowledge to thrive. Given proper instruction, individuals with a college degree quickly learn the basics of financial literacy, whereas those without one struggle to navigate financial realities. Issues of debt, savings, and credit will be even more challenging to grapple with without a college education.