The U.S. Department of Education has often stated that few borrowers are taking advantage of the repayment options available to them. A recent report from theConsumer Financial Protection Bureau (CFPB) shows that the problem may be with the loan servicers, rather than with borrowers. According to the report, borrowers face many difficulties when applying for one of the different types of income-based repayment plans. These plans all lower the borrower's monthly student loan payment to a percentage of their income, and can result in significant savings.
Continue Reading Below
Many borrowers who are eligible to enroll in one of these programs, though, have not been able to because of problems with their application. Lenders may have incorrect information or be working from old data, and rather than asking borrowers to provide the correct information, they reject the application.
The problems occur most often when a borrower has submitted an application but, due to processing delays in the application, there is a change in the borrower's circumstances. The loan servicer is then unable to verify the application information and denies the application. At other times, the problem is that the application is in the system for too long. Some applications were rejected after several months because the income information listed was too old, despite being current when the application was submitted.
The CFPB has introduced a "Fix It" form that servicers will need to send to borrowers explaining why their application was denied.
Find out quickly at what rate you can refinance your student loan.
This article was provided by our partners at moneytips.com.