In the era of “fake news” and everything being political, getting just the facts can be difficult. Finding helpful financial insight can be even more challenging.
This is especially true for student loan borrowers. We have had to deal with scammers, undertrained customer service reps, and politicians that don’t seem to care. These roadblocks make navigating student loan repayment an even bigger challenge.
Worst of all, there is no definitive source to answer all student loan questions. Sometimes borrowers just need to ask their servicer. Other times, the Department of Education is the best source of information. In some cases, the advice of a financial planner or even a lawyer may be the resource needed.
For borrowers, the key to navigating this terrain is to understand the strengths and weaknesses of each resource. The good news is that you don’t have to be an expert investigator. Instead, you just need to know where best to direct your questions.
When to get help from a student loan servicer
The flaws with student loan servicers are well documented at this point. To save a few bucks, call center representatives are often undertrained, and the servicers themselves have little accountability. A great example of the issues with student loan servicers is the Navient lawsuit brought by the Consumer Financial Protection Bureau. Borrowers relied upon information provided by Navient, and it turned out to be awful advice.
That being said, there are times where the student loan servicer is an essential resource for borrowers. If you need to know when your next payment is due and how much you owe, the loan servicer is a necessary point of contact. Servicers are also critical for getting information like loan payoff statements or investigating the status of a request.
Servicers are bad resources for determining student loan strategy. When a borrower calls a student loan servicer, the job of the customer service representative is to answer all questions as quickly as possible. The fasters calls are processed, the fewer people that the servicers have to pay to run call centers. This arrangement is not well suited for providing nuanced advice that accounts for things like future taxes or financial goals like buying a house.
Income-driven repayment (IDR) plan decisions are a good example of where servicers can help and where they might get in the way. When it comes to enrollment, submitting paperwork, and status updates, the servicer is an essential resource. However, the servicer is far more limited when it comes to helping borrowers decide whether or not an IDR plan is a good idea or which IDR plan is best.
Put simply; servicers are best for asking straightforward account questions. Servicers can fall short when strategy or complex rules enter the equation.
Getting the most from The Department of Education
To the credit of the Department of Education, the Student Aid website has improved considerably over the last decade and become an excellent resource for borrowers.
In the past, information was often scattered, and worse, incomplete. Today, the Department of Education website has far more comprehensive information and is much better organized. This website is the best source for definitive information on repayment plan options and terms. The Loan Simulator, formerly called the Repayment Estimator, is perhaps the best calculator available for comparing different federal repayment plans. Finally, the federal student loan database is the best resource for borrowers wishing to track down their federal loans.
Similar to loan servicers, where the Department of Education’s website falls short is in matters of strategy. Studentaid.gov does a nice job explaining the requirements of Public Service Loan Forgiveness. However, they can’t tell borrowers whether they are better off chasing forgiveness or aggressively paying off their student loans.
Can 3rd Party Websites and blogs be trusted?
Student loan websites and blogs like this one can be useful for connecting the dots. How does my federal repayment plan affect my ability to buy a house? Is it better to put extra money in my 401(k) or pay down my student loans?
The problem with unofficial resources is that the quality can vary greatly from one site to the next. At times, it can be difficult to distinguish a scam website from a reputable website.
One easy way to spot a scam website is if they try to charge you for free federal student loan resources. Any website that charges people for services like student loan forgiveness or income-based repayment should not be trusted.
Another issue is that many private lenders and service providers pay to advertise student loan websites. This can induce an otherwise well-intentioned website to encourage borrowers to make decisions that might not be in their best interests.
Borrowers trying to navigate a complex student loan issue should try to verify whatever information they can. When it comes to matters of strategy, the important step is to verify the underlying facts and assumptions provided. For example, if a website has an article about how to save for retirement while paying down student debt, you can verify retirement plan information with your employer, repayment plan rules with the Department of Education, and tax rules with the IRS.
Think of the unofficial websites as brainstorming. They might introduce a unique or creative idea that could be helpful to your particular situation. If the idea holds up to additional research, it might be worth doing. As borrowers do more research, the reputable sites will separate themselves, and the verification step may take less time.
Are paid professionals necessary to answer student loan questions?
Though it might seem overwhelming, most student loan issues are DIY. Unlike the federal tax code, which can be incredibly complex, most borrowers can get an understanding of all the rules that apply to them after a bit of research.
Paid professionals enter the equation when expertise is needed beyond a student loan question. An accountant may be needed to help you resolve questions about filing taxes jointly or separately. If you suspect fraud or want to sue your lender, it is probably time for an attorney to get involved.
Where not to go for advice
There are a couple of sources that can be dangerous to use.
Friends and Family – Friends and family are often well-intentioned when they offer student loan advice, but it can be horrible advice. The problem with seeking the advice of your loved ones is that their loan situation could have been much different from yours. You may have options that your friend doesn’t. You may also not qualify for programs that your friends do. Because this debt is so individualized, it is critical to understand your loans, and not base your decisions upon what somebody else did with their loans.
Social Media – Most people realize that not everything written on social media is true. However, this is only part of the problem. Most student loan questions cannot be answered in a single tweet or Facebook post. Complex questions often require detailed or complicated answers. Student loan decisions can have lasting financial consequences. As such, borrowers shouldn’t make important choices based upon unverified social media.
Verify before you trust
Millions of Americans struggle with student loans. As a result, countless resources are trying to help.
At this point, the vast majority of topics and questions have been covered by multiple experts. This should make it fairly easy to verify most student loan information.
Borrowers that take the time to double-check what they are told will be less likely to make mistakes, better equipped to avoid scams, and can move forward confidently with their decisions.