More than 43 million student loan borrowers are in debt by an average of $39,351 each, according to statistics reported in November by the Education Data Initiative.
Over the past two years, more than 35 million of these borrowers with federal student loan debt qualified for general student loan debt relief under the federal CARES Act of 2020, according to the EDA.
The EDA’s most recent analysis also shows that one out of every 10 Americans has defaulted on a student loan, 15% of student loans are in default at any given time, and $124.4 billion of the total $1.75 trillion in student loan debt is in default.
With extended CARES Act relief deadlines and expanded eligibility due to recent changes in the Public Service Loan Forgiveness program, it can be confusing to navigate the complex world of student debt.
[Read: Update on Coronavirus Relief for Student Loan Borrowers.]
Enter nonprofit financial counseling agencies, which serve as independent advocates for borrowers and provide the following:
— Independent, one-on-one guidance, bridging the knowledge gap between borrowers and lenders to find a common ground.
— Student loan counseling that helps borrowers understand terms and repayment options, and identify affordable solutions that can keep them on track with payments.
— Counselors who help borrowers understand repayment options, know which options are best for their specific situation, — especially borrowers who are already delinquent or in default and need help remedying their situation — and help borrowers stay current on ever-changing policies.
Before working with a nonprofit student loan counseling agency, consider the following advice.
Check the Agency’s Reputation
Before reaching out to an agency, check its reputation. Work with nonprofit student loan counseling services that are certified by the nonprofit National Foundation for Credit Counseling.
[READ: Student Loan Default: What to Know.]
In recent years, there’s been a rise in companies offering loan forgiveness and reduced payments. While these can be very alluring to debt-ridden consumers, many of these offers that sound too good to be true are scams.
To increase awareness of student loan relief schemes, the Department of Education is coordinating efforts with the Federal Trade Commission.
It’s important for borrowers to know who they can trust and when they should reach out for help with their student loans.
Understand the Fee Structure
Most nonprofit student loan counseling agencies require no fees to help consumers understand their options and equip them with the knowledge they need to conquer student loan debt.
As an example, as part of free services, a certified student loan counselor reviews a borrower’s student loans to determine payment options based on loan types; explores repayment options to make sure the borrower understands the pros and cons of each; and develops a customized plan to help the borrower pay educational debt and other bills.
If fees are charged, be sure the agency makes them transparent and easy to understand. Typically, fees vary based on the level of involvement the counselor has in the process.
If a borrower needs hands-on assistance filling out the application for a repayment program or wants the counselor to contact the loan servicer directly, the fees are usually higher.
In general, fees vary based on the NFCC member agency’s fee schedule and dues set by the borrower’s state of residency. Some funds are available through the NFCC to provide scholarships to consumers needing student loan counseling; these funds can be used for a student loan session provided by a member agency.
In addition, some nonprofit agencies partner with credit unions and banks, so it’s smart to check for affiliations with student loan and financial counseling agencies.
Review Available Services
Certified nonprofit counseling agencies should offer a tier of services that address a borrower’s full financial picture. Be sure that the initial counseling session includes an assessment, which helps borrowers see how mortgage, consumer debt or other debt might be affecting their budget, as well as how long it will take to pay existing debt off and other personalized information.
[READ: Can I Buy a Home If I Have Student Loan Debt?]
Once the agency pulls a credit report for a list of debts, including all student loans, the counselor can then the client develop a repayment strategy that makes the most sense.
Check that a counselor can educate you on the pros and cons of available programs, strategies to reduce the amount of interest paid over the life of the loan and steps to ensure timely repayment and options for keeping repayment affordable.
For delinquent borrowers, a counselor should offer an in-depth analysis. Delinquent or defaulted loans will be addressed, and the counselor should help create a personalized plan to bring delinquent loans current and rehabilitate any defaulted loans.
Loan forgiveness might be an option. Counselors can help borrowers stay current with the Department of Education overhaul of the Public Service Loan Forgiveness Program, which expands the previous limits with eligibility regarding type of loan, repayment options and past loan payment history.
Taking the time to work through your situation with an accredited nonprofit financial counseling agency that specializes in student loans can help you get matched with the best student loan debt reduction plan for you.
More from U.S. News
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7 Tips to Pay Off Multiple Student Loans
14 Terms You Need to Know Before Repaying Your Student Loans
How to Work with a Nonprofit Student Loan Counselor originally appeared on usnews.com
