New Survey Reveals Lack of Awareness about Student Loan Repayment Options

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Although the fate of the Biden Administration‘s debt erasure plan remains uncertain pending a decision by the U.S. Supreme Court, income-driven repayment plans have emerged as a promising alternative for former students.

Student Loan Repayment
Student Loan Repayment ( Photo: Bankrate )

A recent survey has shed light on the lack of awareness among borrowers regarding a potential solution for student loan debt repayment

These plans allow borrowers to make payments based on their income rather than the total amount borrowed. Lane Thompson, the student loan ombudsman for the Oregon Division of Financial Regulation, highlighted a proposal from the U.S. Department of Education that aims to make these plans even more appealing. The proposal suggests enabling borrowers to retain a larger portion of their earned income, reducing the percentage of monthly income allocated for repayment, and offering forgiveness after a decade instead of the current 20 or 25 years.

Despite the potential benefits, a survey conducted by New America uncovered a significant lack of awareness among those who would benefit most from income-driven repayment plans. Shockingly, over 40% of low-income borrowers surveyed had never heard of these plans.

Thompson emphasized the severity of this issue, stating, “It really is a problem that more people are unaware of the existence of these income-driven repayment plans.”

He further expressed the need for borrowers to be informed about the Fresh Start program, which aids individuals in escaping default and removes the associated negative impact on their credit reports. To access the program, borrowers must contact their loan provider.

With loan repayment set to commence later this summer, it is crucial for borrowers to familiarize themselves with the available options. Raising awareness about income-driven repayment plans and the Fresh Start program would greatly benefit borrowers, ensuring they are better equipped to manage their student loan obligations.

 

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