One of the major perks of taking on federal student loans is that many of them are eligible for an income-driven repayment plan.
Under one of these plans, student loan payments are based on a percentage of your income, typically 10 to 20 percent. This can be immensely helpful for borrowers who can’t afford their standard monthly payments.
But it’s not always easy for federal student loan borrowers to get approved for a plan. Or, maintain their status. Many also experience processing delays or wrongful rejections by their federal student loan servicers, according to a recent press release from the Consumer Financial Protection Bureau (CFPB).
That’s why the CFPB has created the income-driven repayment plan “Fix It Form.” It’s for servicers to use to improve their customer service for borrowers. Here’s how this CFPB student loans service can help you.
CFPB student loans report
Opting for an income-driven plan can be a great financial tool for federal student loan borrowers.
Yet according to the CFPB, a top complaint from student loan borrowers had to do with income-driven plans. These complaints cited delays, rejection, and recertification problems.
Essentially, any delays or wrongful rejections of income-driven plans by servicers can result in increased interest charges for borrowers. They could also lose eligibility for certain federal benefits and protections.
My boyfriend experienced this very thing just last month. He was recertifying his income-driven plan (which you must do annually) and sent in all the required paperwork.
He didn’t hear anything back from his loan servicer. But when his loans were due, the payment amount had increased significantly. Definitely a problem.
So he called them to rectify the situation. Sure enough, his loan servicer had yet to process his information. Luckily, they were able to take action and he didn’t end up having to pay the increased amount. But if he waited any longer, he might not have been so lucky.
How the “Fix It Form” can help borrowers
As of the first part of 2016, a total of 5 million federal student loan borrowers opted for an income-driven plan, according to the CFPB student loans press release.
Using the two-page “Fix It Form,” loan servicers can make it easier for student loan borrowers to understand what’s going on. Then borrowers can move forward with clear and concise information.
The form requires your first name, last name, and student loan account number. To make everything clear, there are only three statuses that loan servicers can choose: Accepted, Denied, and Incomplete.
Under each status, there are clear next steps and reasons listed for the decision. If your application is incomplete, your loan servicer can let you know what is missing and where to send the additional information.
The CFPB student loans “Fix It Form” aims to make the process of applying, recertifying and accessing an income-driven plan easier.
Income-driven plans remain significant
Many student loan borrowers are eligible for an income-driven repayment plan but aren’t taking advantage of it, according to a recent government report noted by the CFPB.
If you can afford your full monthly payments, then you’re in the clear. But if you are headed toward default and struggling to make payments, an income-driven plan can be a lifesaver. It can also keep you in good standing with your student loans.
The CFPB estimates in its press release that 25 percent of borrowers are in default or struggling to keep current with their student loan payments. An income-driven plan can make your payments more manageable. It can also help you avoid delinquency or default.
The “Fix It Form” comes on the heels of the U.S. Department of Education urging loan servicers to set the bar higher when handling income-driven plans. That’s why the CFPB is working to bridge the gap between loan servicers and borrowers with its new form.
If loan servicers adopt the “Fix It Form,” they may be able to increase transparency, improve access, and create a consistent servicing experience. This can help student loan borrowers enjoy the benefits of an income-driven plan. Without all the hassle.
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