Previously Defaulted Federal Student Loan Borrowers at Higher Risk of Defaulting Again, AFBC Recommends Considering IDRs for Loan Management

EMERYVILLE, Calif., May 10, 2018 (Newswire.com) - Federal student loans are easy to take out and borrowers have several options to accommodate different situations through repayment. Despite the availability of income-driven repayment plans (IDRs), many borrowers miss enough payments on their loans to default. It takes 270 days without making a payment to default, and borrowers who do so have few options for getting back on track. American Financial Benefits Center (AFBC), a document preparation company that helps federal student loan borrowers with repayment plan applications, reminds borrowers that income-driven repayment plans are intended to help them afford their payments.

“Defaulting is a symptom of the greater student loan problem, but it’s an important one because it has heavy consequences for individual borrowers,” said Sara Molina, manager at AFBC. “Borrowers who default do have options, but they should pay special attention to their situation after getting out of default.”

Defaulting is a symptom of the greater student loan problem, but it's an important one because it has heavy consequences for individual borrowers.

Sara Molina, Manager at AFBC

Borrowers who default can get out of default through rehabilitation or consolidation. While both options have advantages and disadvantages, the intention is for such borrowers to get back on track in repayment. However, data suggests that is not always the outcome.

According to a 2016 CFPB report, more than 90 percent of defaulted borrowers did not transition into an IDR after “curing” default. Such borrowers were five times more likely to default a second time. In fact, nearly half of those who cured default through rehabilitation defaulted a second time, and most of them failed to make a single payment.

Because defaulting can negatively affect borrowers’ respective credit scores, which can impact future financial decisions, borrowers should do what they can to avoid defaulting. Borrowers who have defaulted once may be at higher risk of defaulting again, so it’s essential that they take steps toward successful repayment.

AFBC suggests that borrowers who are at risk of defaulting look into income-driven repayment plans. Defaulting suggests a long-term inability to make student loan payments. Such situations may be uniquely addressed through enrollment in IDRs, which calculate payments based on income and family size. Borrowers in certain circumstances may even see a zero dollar payment. After 20 to 25 years of enrollment in an IDR, any remaining balance will be forgiven.

“At AFBC, we specialize in helping our clients apply for recertification in their IDR so they can continue to be able to prevent default,” said Molina. “We hope to give our clients the tools they need to be successful in repayment. And if we can help them avoid defaulting year after year, we consider our work a success.”

About American Financial Benefits Center

American Financial Benefits Center is a document preparation company that helps clients apply for federal student loan repayment plans that fit their personal financial and student loan situation. Through its strict customer service guidelines, the company strives for the highest levels of honesty and integrity.

Each AFBC telephone representative has received the Certified Student Loan Professional certification through the International Association of Professional Debt Arbitrators (IAPDA).

American Financial Benefits Center Newsroom

Contact

To learn more about American Financial Benefits Center, please contact:

American Financial Benefits Center
1900 Powell Street #600
Emeryville, CA 94608
1-800-488-1490
​[email protected]

Source: American Financial Benefits Center