Studies have shown that student loan borrowers that enter forbearance wind up with a ballooned student loan debt balance. 

For recent college graduates, making their monthly student loan payments can feel like a financial burden. For that reason, there are safeguards in place for individuals who are having trouble repaying their student loans. It happens all too often, which was covered in a study by The Student Loan Report.

But rather than helping, many borrowers see their loan balances double, triple, or even quadruple as they struggle to avoid going into default, CNBC reported. One of the biggest mistakes borrowers can make is to defer their loan payments for several years until they are making more money. Most find that it’s their debt – not their income – that has skyrocketed.

Schools can lose their access to financial aid if too many borrowers default on their loans within the first three years. In 2016 alone, the Department of Education imposed sanctions on 10 colleges. As a result, many schools began hiring consultants who push struggling borrowers to put their loans into forbearance.

Loan forbearance involves temporarily postponing payments and while it’s a temporary fix, it isn’t a good long-term strategy for managing debt. Student loan experts caution that loans in forbearance continue to accrue interest and capitalize, which puts the borrower deeper in debt.

Borrowers who have defaulted on their loans often look to loan rehabilitation, not knowing this comes with pricey consequences. This is a one-time opportunity for borrowers to clear the default and become eligible for student aid again.

What’s the Issue?

The problem is lenders will usually add collection costs to the new loan balance. This fee can be as high as 16 percent of the unpaid principal and accrued interest. And the Consumer Financial Protection Bureau found that 40 percent of borrowers who chose loan rehabilitation defaulted on their loans again within three years.

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Public servants with high balances were excited to learn about the Public Service Loan Forgiveness program. This program promises to forgive the loans for individuals who work in government or nonprofit jobs after 10 years of consecutive payments.

The first loans became eligible for forgiveness in 2017 and that’s when many borrowers learned their loans would not be forgiven because they signed up for the wrong payment plan. 16,000 people have applied for loan forgiveness since October 2017 but less than 1,000 people are expected to be found eligible.

Are There Other Options?

The Brookings Institute found that 40 percent of borrowers are likely to default on their loans by 2023. But loan forbearance isn’t the only option for avoiding default and should only be done in extreme cases. Some borrowers may find that income-driven repayment plans or student loan refinancing would be better options to pursue.

However, even these options come with their caveats.

Student loan refinancing is notoriously hard to qualify for, and it’s often only readily available to the most qualified candidates, who may not have need to refinance in the first place. Refinancing may be out of the question to a borrower who’s nearing default.

Income-driven repayment programs are more readily available to impacted borrowers, but while they can offer relief through a lower monthly payment, many borrowers find that their balance increases during repayment. This is due to lower payments capped at a percentage of income.