As far as I can tell, there is an incredibly challenging, though not insurmountable, situation happening in the student loan industry.
And young borrowers, fresh out of college are receiving the brunt of these challenges!
The trouble with the student loan industry has many layers, but I’d say that a lack of transparent, attentive communication and borrower-friendliness is at its core.
In my view, the trouble can be divided into 3 parts:
1. “Debt Relief” Agencies
Much of the trouble with the student loan industry is that debt relief agencies are preying on borrowers, aggressively marketing across media channels, and selling “repayment assistance” for exorbitant amounts of money.
These repayment options are not only already available, for free, through government websites, but they’re also not necessarily the best solutions for every borrower’s needs. (e.g. “Consolidate now! Enroll in Income Based Repayment!” they say. But are they taking the time to really evaluate if those options are really the best choice for the borrower’s financial circumstances and upcoming goals?)
To top it off, these debt relief agencies are not transparent with the ways they claim they will help borrowers. Profit is their guiding post, not the borrower’s well-being.
2. Student Loan Lenders
The second part of the trouble with the industry is that student loan lenders (Sallie Mae, Wells Fargo, AES, etc.) can only offer one-size-fits-all solutions that benefit their organization — simply put, they’re focused on their own benefit, not the borrower’s.
Lenders have a narrow vision for their guidance, which only includes advice for the loans you carry with them. They won’t help you make sound choices on what’s best for all your loans.
Plus, because of the sheer size of their organization and volume of callers, they cannot take the time to really look at each borrower’s entire student loan portfolio, and considerately guide them through the choices that will benefit their entire financial landscape. (That, in fact, happens to be my job.)
3. Debt Repayment Literacy
The third part of the trouble with the student loan industry is that there aren’t any good educational programs in universities that help borrowers prepare for their debt repayment.
If there were, cohort default rates (the percentage of borrowers that default on their student debt repayment two or three years after graduating) wouldn’t be as high as they are today.
Financial aid departments are great at getting students into debt, but not out of it!
Moreover, most (if not all) financial aid departments have no idea about how to educate borrowers on smartly repaying their student debt (student debt offers the most flexibility with repayment, more than credit cards, mortgages, car liens, etc. but that’s not what students across the U.S. are being told).
As the saying goes: they don’t know what they don’t know!
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Please know, there are many, many options available for easing your student debt repayment (both for federal loans, and for all types of private loans).
As with everything else, an education and careful planning on how to go about your student debt repayment can prevent a lot of problems in the long run.
If learning about the many ways your student debt repayment can go right – and fit into your current budget and plans – sounds like something that can benefit you, please schedule a call with me today.
Together we’ll determine if whether all you need to do is fill out a quick, federal student loan consolidation application online (for free!) or create a comprehensive plan of action that involves all your loans, and your upcoming plans for your life.