It is time to expose a few student loan secrets.
Student loans can be quite complicated. Between changes to the law, Department of Education policies, and private sector changes; staying on top of everything isn’t easy. As a result of the constantly evolving student loan system, borrowers often miss out on both warnings and good news.
Today we will be shedding some light on four little discussed, but very important concepts.
The Idea of a Co-signer Release is More Myth than Reality
Many lenders love to add co-signers to a loan. By getting a co-signer on the hook, the lender now has two people legally responsible for the debt… a huge win for them. If a potential co-signer is hesitant to sign on the loan, the lender will point to their co-signer release program. Under this program, co-signers can be released from the loan in as little as a year.
The problem is that the decision to release the c0-signer is at the sole discretion of the lender. At the point a release is even up for discussion, it means the lender already has your business. There is almost no incentive for a lender to ever grant a release. As a result, lenders will come up with any excuse to deny a release application. A report from the Consumer Financial Protection Bureau Exposed this Issue.
Fortunately, even though a co-signer release is a longshot, there are still ways to get a co-signer removed from a loan.
The Challenge of Public Service Loan Forgiveness Isn’t What You Think
When I first wrote this article five years ago, the “secret” was that it is actually hard to qualify for Public Service Student Loan Forgiveness (PSLF).
After significant media attention on the subject, many borrowers realize it is a huge challenge. In some cases, the pendulum has swung the other way. I’m now hearing from readers who won’t even consider PSLF because they think it is impossible. However, many other borrowers cling to the notion that it is easy and they will definitely qualify.
In truth, both groups are probably wrong.
Beyond making sure that you work for an eligible employer, any borrower considering PSLF should make sure they understand the fine print of the program.
Assuming that it will work, or assuming that it is impossible, are both mistakes.
You don’t have to put up with abuse from Navient or Sallie Mae
By far the biggest name in the student loan business is Sallie Mae. A few years ago Sallie Mae split off into another company, called Navient, and Navient picked up where Sallie Mae left off.
Perhaps the most frustrating experience for any borrower is calling customer support in desperate need of help and being unable to get any answers. Unfortunately, things can get worse, because borrowers are often given the wrong answer.
After a disappointing outcome with Navient or Sallie Mae, many borrowers just accept their nonsense and move on.
Fortunately, there are resources in place to hold Sallie Mae and Navient accountable. These resources are provided by the lenders themselves and the federal government. Learn how to resolve complaints with Navient and Sallie Mae and how to hold them accountable. If this particular student loan secret were better known, borrowers would get better service from their lenders.
You are Probably Spending too much on Your Student Loans
If you just pay your bill each month as it comes in the mail, odds are pretty good that you are spending too much on your student debt.
Better Repayment Plans are available – Government data consistently indicates that borrowers are not on an optimal repayment plan. Part of the problem is that the standard repayment plan is the 10-year plan. Of all the government repayment plans, this is the plans with the highest monthly payment. Borrowers who cannot afford this plan have many other options including income-driven payments that could lower their bill to $0 per month, yet many do not sign up.
Even if you have private loans, there are programs in place for borrowers who are in over their heads. These Rate Reduction Programs could help many borrowers, but due to a lack of awareness, many people miss out.
Lower interest rates are available – If you read the last paragraph and thought that it didn’t apply to you because you are easily making your payments, you could be paying way more interest than necessary.
When student loans are issued, the borrower has no degree or job, and represents a pretty big credit risk. As a result, student loan interest rates can be pretty high. Lenders, including the federal government, realize that not everyone will be able to pay back their loans, so the interest rates are set high enough that they still make a profit even if not everyone pays.
Once you have a job and a degree, you are much less of a credit risk. In fact, you are a great investment. It is part of the reason that multiple lenders offer refinance interest rates below 2%. By taking advantage of your improved financial situation it is possible to dramatically reduce your student loan interest rate.