American Financial Benefits Center Warns That Forbearance is Easy but Not the Only Solution to Unaffordable Federal Student Loans

EMERYVILLE, Calif., May 8, 2018 /PRNewswire/ -- When federal student loan borrowers cannot make their loan payments and call their servicer to talk about their options, they may be asked if they want to enter into forbearance. Forbearance delays payments by pushing out the due date, but interest still accrues during that time. At the end of forbearance that interest capitalizes and, if the loans were forborne for a long period of time, the balance can increase substantially. American Financial Benefits Center (AFBC), a document preparation company that helps its clients with federal income-driven repayment plan application and recertification paperwork, suggests that borrowers consider all their options before jumping into forbearance.

"Forbearance isn't a one-size-fits-all solution for borrowers who can't make their payments," said Sara Molina, manager at AFBC. "Just like other options, they are best used in certain situations. Borrowers who need a long-term solution might want to look into other repayment plans."

Some student loan servicers have been accused of steering borrowers into forbearance even when they might benefit more from enrollment in a different repayment plan. A recent report showed how schools have been employing counselors who have also been pushing students into forbearance to minimize the default rates of cohorts during the three years following graduation.

Borrowers may benefit from forbearance if they are typically able to make their monthly payments but need to delay their payments for a short period of time. Because interest capitalizes when loans are moved out of forbearance, long-term forbearance can lead to even higher monthly payments. While borrowers may choose to pay only interest during forbearance to minimize the penalty, borrowers who cannot afford to make their payments may benefit from income-driven repayment plans (IDRs).

IDRs calculate payments based on income and family size and can end in the forgiveness of any remaining balance after 20 to 25 years of enrollment. Such programs require that borrowers resubmit their income and family size documents each year to remain in the program. Periodic recalculations are intended to ensure that payments do not exceed 10 or 15 percent of borrowers' income, making IDRs a long-term solution that might help many borrowers.

"While sometimes it makes sense for borrowers to be in forbearance, it should not be used as a long-term solution," said Molina. "At AFBC, we help our clients submit yearly recertification paperwork to stay in IDRs as long as they wish to. We encourage any federal student loan borrower who can't afford their payments to look into IDRs."

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).

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]

Related Images

image1.png

forbearance-delays-student-loan.jpg
Forbearance Delays Student Loan Payments
Credit: Stmool/Bigstock

Related Links

AFBC home page

SOURCE American Financial Benefits Center