Understand the pros and cons of income-driven plans for student loan repayment
Knowing these pros and cons can help you make the right decision for you.
The federal government has created some great options to help student loan borrowers to successfully pay back their student loans in the last year. With this has come some challenges. Many borrowers have reported to the Consumer Financial Protection Bureau (CFPB) issues with processing, servicing transfers, customer services, to name a few.
For student loan borrowers who are already struggling financially but still want to make good on their student loans, the income driven repayment plans have been a saving grace. Unfortunately, enrolling into these programs has not been an easy process. Borrowers have reported delays in processing their applications and/or have been given wrong information from customer services representatives. The primary issues have revolved around the recertification of the repayment plans.
To help borrowers be successful with the process the CFPB has shared some helpful tips and information for borrowers enrolled in income-driven repayment plans where recertification has been one of the main issues.
Make sure your recertification is processed on time each year. The income driven repayment plan have to be recertified on time every year you wish to stay on the plan. If your recertification is not processed on time, it can:
- Cause the amount you owe each month to go back to the payment you had before and was unaffordable for you.
- Cost you a great deal more money over the life of the loan. One benefit of income-driven repayment plans are any unpaid interest does not get added to your outstanding principal balance unless you choose to leave the plan. Not recertifying will cause you to lose this benefit.
- Delay you’re eligibility for loan forgiveness. If your recertification is not processed in a timely fashion and you need to go into forbearance to get the processed finished, that time can’t be counted toward loan forgiveness timeline.