Department of Education to Contact Federal Student Loan Borrowers, Explain Repayment Options
As first reported, September 3, in The Huffington Post in an article co-authored by Shahien Nasiripour and Joy Resmovits, Sallie Mae, the nation's largest servicer of federal student loans, is failing to enroll many of its distressed borrowers into income-driven repayment plans. "Sallie Mae, a.k.a. SLM Corp., has enrolled relatively few borrowers into the Income-Based Repayment program. Sallie Mae dominates the now-discontinued Federal Family Education Loan Program, owning between 37 and 40 percent of the outstanding FFELP debt held by the private sector. But its share of FFELP borrowers who are enrolled in IBR is about half that, or 15 to 18 percent," according to documents obtained by The Huffington Post.
“It is concerning that Sallie Mae has such a disproportionately low number of borrowers utilizing the Income-Based Repayment program,” said Persis Yu, a staff attorney at the National Consumer Law Center. “Unfortunately, we do not have a lot of data about Sallie Mae or other servicers' performance.”
Department of Education Takes Action
Starting next month, the Department of Education will contact borrowers who are struggling to repay their federal loans to make sure they know all the options available to them. “We think there are lots of people who could benefit from our income-based repayment programs but haven’t signed up, and we want to get to them before they default,” said Arne Duncan, the education secretary. “The challenge is getting the word out.”
To spread the word, the department is planning to send e-mails to those who seem most likely to benefit from the programs, explaining debt-relief plans based on the borrower’s income. Of all of the department's recent efforts to make college more affordable and reduce the numbers of federal student loan borrowers slipping into default, this initiative has the best chance in our opinion of placing a significant dent in the problem of spiraling student debt.
Flexible student loan repayment options and forgiveness provisions are available for borrowers of federal student loans, but they can be tricky to navigate and the details matter. To learn more about Income-Based Repayment, "Pay As You Earn," and other income-driven repayment options, visit our tools page.
To learn more about how the Department of Education plans to reach out to financially troubled borrowers, read the New York Times article here.
