Three federal agencies have issued guidelines to student loan servicers to help students repay their loans and avoid default.
The guiding principals from the Departments of Education and Treasury and the Consumer Financial Protection Bureau (CFPB) are designed to make sure borrowers are protected and have the information they need, even if they are struggling under the burden of their debts. It also is meant to provide ways to quickly resolve errors and hold federally-contracted companies accountable.
The guidelines say servicer policies should be consistent, accurate, accountable, and transparent.
Student loan debt has become an issue as outstanding loans now approach $1.3 trillion, saddling many recent graduates – not to mention those who left school before getting a degree – with significant debt as they start careers.
Types of loans
There are four main types of post-secondary education loans under which borrowers have outstanding balances. Direct Loans are federal loans made directly to borrowers by the U.S. Department of Education through the William D. Ford Federal Direct Loan program.
Federal Family Education Loan Program (FFELP) loans were originated by private lenders and guaranteed by the federal government.
Federal Perkins Loans, which are co-funded by institutions of higher education and the federal government, are originated and administered by participating institutions.
Private student loans are made by depository and non-depository financial institutions, states, colleges, and other entities.
Alternatives to loans
Finding alternatives to student loans has become a priority as college costs continue to rise. As we previously reported, College Abacus is a free online tool allowing students and families to calculate the amount of aid they qualify for when applying at more than 5,000 colleges and universities.
Now it has launched a new site, Pell Abacus, which it says will simplify and streamline the college search process for low-income students who are likely eligible for federal Pell Grants.
“By making this process simple to navigate without tax forms and accessible on mobile phones, we’re removing some of the key barriers preventing low-income students from exploring their full range of college options,” said Abigail Seldin, co-founder of College Abacus and vice president of Innovation & Product Management at ECMC Group. “Our goal with Pell Abacus is to not only streamline the college search process for underserved students, but to empower them by providing meaningful context around the most important financial factors impacting college choice, from personalized net prices to school-specific loan repayment information.”
The new Pell Abacus desktop site provides school-specific data on different financial factors, such as average loan payments for Pell students, the percentage of students who receive Pell Grants and the average monthly income percentage spent on federal loan repayments after college.
Pell Grants are government stipends that allow students, based on need, to pay for college. Grants, unlike loans, do not have to be repaid, making it a great alternative to student loans.
In a previous interview with ConsumerAffairs, Seldin said the College Abacus tool helps students access grant money, reducing the need for borrowing. Check it out here.