Today is Memorial Day and while many people simply see it as a “free day” from work, in fact it’s a day to honor all the women and men of the armed forces who have lost their lives in service to our country. It’s important to honor those who have given their lives for our personal freedoms, but it’s also important to acknowledge those that are still among us, still serving, still struggling… And it’s also a good day to call attention to those taking advantage of our soldiers – such is the case with many student loan providers!
Late last year, the Consumer Financial Protection Bureau (CFPB) released a report on student loans and their effects on service men and women. Their report cites a National Center for Education Statistics report showing that average student loan debt for service members is $25,566. Further, CFPB’s report identified problems with service members taking on less advantageous repayment plans that were recommended to them by their loan providers yet are costing them thousands of additional dollars in interest and causing long term problems.
Our question is: are lenders engaged in predatory practices against our service men and women? If not, is the explanation simply apathy, ignorance or carelessness on the part of those who convince service members to take a plan that is clearly not the best option for them?
CFPB surveyed service members who had sought advice on repayment plans from their loan servicer and found that many were “guided into military deferments or forbearances and were unaware that upon the completion of their active-duty service their total loan debt would balloon due to the accumulation of unpaid interest.”
As we’ve written recently, deferment and forbearance should be last-ditch alternatives to prevent loans from going into delinquency and default, but are not the preferable option. In fact, service men and women have a number of repayment plans open to them that are intended to be very beneficial and reward them for their service to our country.
You can see from the table that there are many plans that would be much more beneficial to military members in student loan debt – far, far better than deferment or forbearance. In particular, income based repayment (IBR) can set payments at very affordable levels since military members don’t enjoy hefty salaries. IBR payments are “qualifying” payments that will keep the soldier eligible for Public Service Loan Forgiveness programs. This is a one-two punch that can maximize the benefit to those in the armed forces!
Some of the other highlights from the report include these disturbing findings:
— Many service members navigate hurdles that may be unnecessary in order to receive the SCRA interest rate cap (a program that caps interest rate while on active duty).
— Servicing errors prevent service members from accessing their full range of protections.
— Standards for awarding benefits are inconsistent and, as a result, may frequently be misapplied by servicers.
From our perspective, it’s a shame that lenders and loan servicers are not making every effort to make taking advantage of military student loan benefits easier for service members. Of course that means less profit for their coffers, but consider this – what shape would our nation be in if our men and women in uniform acted in a similar selfish fashion? Fortunately for all of us, they don’t.
If you’re a military service member with education debt or anyone with student loans, download Tuition.io’s free award-winning student loan management tool today. You’ll be able to view and manage all of your loans in one easy interface and explore repayment plans (even those your lender doesn’t tell you about) so you can optimize your debt.
Today, on Memorial Day, let us remember with deep appreciation those that gave their lives in service to their country but also not forget those still in service and risking their lives every day! Please also enjoy these other recent blogs on student loans and the military: