Forbearance delays student loan repayment

Borrowing for higher education has become commonplace, as have problems with repaying those loans. Borrowers who take out federal loans are assigned a student loan servicer, through which they are responsible for making their monthly payments and from whom they can get information about their loans and repayment options. However, those servicers do not always give borrowers the most personalized information. Brandon Frere, CEO, entrepreneur and expert in the student loan industry, reminds borrowers to go prepared into conversations with their servicers.

“Servicers are supposed to help guide borrowers through repayment,” said Frere. “Too often they mislead borrowers — whether intentionally or not — or make mistakes that result in extra costs that fall into the borrowers’ laps.”

The Consumer Financial Protection Bureau has collected thousands of complaints about federal student loan borrowers. Such complaints run the gamut from misallocated payments to refusals to give pertinent information. Servicers have also been accused of steering borrowers into forbearance when an alternative repayment plan would have been more beneficial for borrowers.

Forbearance is an option for delaying federal student loans. While in forbearance, loans still accrue interest and at the end of forbearance, that interest is capitalized. For short-term delays, borrowers who have access to deferment are usually better off using that. Or, if they need a long-term solution, federal income-driven repayment plans can cap payments at a percentage of discretionary income.

“Servicers do a lot of things that warrant complaints by borrowers,” said Frere. “When borrowers need help with their loans, they are instructed to talk to their servicer so that service should be exceptional. The truth is, though, that it’s not always reliable.”

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