Thousands Fall Out Of Income-Based Repayment Plans
“Thousands of struggling borrowers are falling out of income-driven student-loan repayment plans because they’re not filing their annual income documentation on time, Education Department officials revealed on Wednesday. And many of those borrowers are falling behind on their loans as a result,” The Chronicle of Higher Education reports.
Related: Understand The Difference Between Delinquency vs. Default
Over the course of a yearlong period from 2013 to 2014, almost 700,000 borrowers who had enrolled in income-based plans — 57 percent of the total — failed to ‘certify’ their income by the deadline. That lapse sent the borrowers into standard repayment, where their monthly loan bills were higher, sometimes significantly so.
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While roughly a third of the borrowers who missed the deadline re-enrolled in income-driven plans within six months, a third went into a hardship-related forbearance or deferment, and some 15 percent became delinquent on their debt, according to the officials, who spoke at a rule-making session here. (And that’s just the borrowers with direct loans. Borrowers with loans made under the old bank-based lending program missed the deadline about 40 percent of the time, according to loan servicers sitting on the rule-making committee.) …
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So why are so many borrowers missing the deadline? One reason may be that they’re ignoring or overlooking the renewal notices that servicers are required to send 60 to 90 days before the paperwork is due. While some servicers send out letters with brightly colored warnings like ‘time-sensitive’ and ‘rush,’ others send generic emails that give little indication of the urgency of the task.”
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