The U.S. financial watchdog Consumer Financial Protection Bureau (CFPB) Thursday released a new set of tools student loan borrowers can use if they run into trouble making payments on their accounts.
The federal agency’s goal in the release is to help distressed borrowers avoid defaulting on their student loans and going into collections.
The CFPB released a sample letter that consumers can edit and send to their student loan servicer to request lower monthly payments and information on available repayment plans. Borrowers can download the sample letter to send by mail, or simply cut and paste the text into their servicer’s website. The letter specifically requests monthly payments that would allow borrowers to meet their other living expenses.
Download the CFPB’s sample letter (.doc format)
The CFPB has also developed a sample financial worksheet to assist borrowers in determining maximum funds available to pay their student loans. Figuring out how much one can reasonably afford each month is often difficult for young adults that have not had to set a household budget previously. The Bureau is hoping that the budgeting help can keep loans current.
Download the CFPB’s financial worksheet (.doc format)
The CFPB also encouraged student loan borrowers to use its existing Repay Student Debt tool, an interactive “wizard” that steps debtors through the many options available to make payments.
The publicizing of the new tools comes in conjunction with a report also released Thursday by the federal agency. The 2014 CFPB Student Loan Ombudsman’s Annual Report notes that the Bureau received a sharp increase in complaints from student loan borrowers that private lenders were not “providing concrete loan modification options.”
The report analyzed more than 5,300 private student loan complaints between Oct. 1, 2013 and Sept. 30, 2014, an increase of 38 percent over the previous year. It highlights that many consumers expressed a commitment to repaying their loans if they could qualify for a payment plan that reflected their current financial circumstances.
But many of these borrowers are being driven to default because no viable repayment options are available to them.
When a consumer defaults on their private student loan, the whole balance may become due in full, immediately. This usually causes damage to a consumer’s credit profile. It can also negatively affect a consumer’s ability to pass a background check for a job, obtain housing, and impede access to other forms of credit.
Rohit Chopra, the CFPB’s Student Loans Ombudsman, noted in a blog post that “Although some companies are willing to help borrowers during a time of financial distress, unfortunately, not all private student loan companies offer assistance when consumers are struggling to repay their loans. Using [these tools] may help you get a clear answer and avoid long hold times and transfers from one call center representative to another.”