In December, the Consumer Financial Protection Bureau (CFPB) reported that Americans now owe a trillion dollars in college debt, more than they owe in car loans. In January Fair Isaac's FICO Labs indicated that the average debt outstanding (per student with loans) increased to $27,253 in 2012, with 15% of loans now in delinquent status and the U.S. delinquency rate rising sharply.
How can you help clients (and their children and grandchildren) manage this enormous and growing debt burden? Here are two ideas.
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The CFPB, created by the Dodd-Frank law, is unlike any other federal agency, in that it writes clear, concise and helpful information in plain-English. If you haven't read or used any CFPB pieces before, this is a good place to start.
Next, learn all you can about the income-based repayment (IBR) method, which is available for most types of federal loans made to students, but not PLUS loans made to parents. Under IBR, monthly payments can be greatly reduced for students who are unemployed or have low-paying jobs. If the required monthly payment doesn't cover accruing interest due, the government pays the balance of the interest for up to three consecutive years. After 25 years of IBR payments, any remaining principal balance is cancelled.
The U.S. Department of Education (DOE) resource on IBR is located here: http://studentaid.ed.gov/repay-loans/understand/plans/income-based
You can help clients access a quick-and-easy IBR monthly payment calculator here: http://studentaid.ed.gov/repay-loans/understand/plans/income-based/calculator
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