A few days before the new year, I read this headline in The Washington Post:
There’s a way to dramatically lower student debt payments, but hardly anyone uses it
As a financial educator, I was immediately curious. What was this new technique? And why hadn’t I heard about it already?
The article described “a government program…that lets borrowers cap their monthly loan payments depending on how much income they’re earning.”
Turns out, The Washington Post was mostly reporting old news. That “government program” is actually split into five distinct parts, and Debt.com has been telling you about all of them for more than a year. Check out Options For Paying Off Your Student Loans.
The new news was this astounding fact: “Only 14 percent of Americans with federal student debt are enrolled in government plans that allow them to lower their payments if they’re not making enough money to cover them.”
That stat shocked me, although I already knew participation was low. I knew the reasons, too. The Washington Post summed it up…
The trouble is that many of these borrowers are unaware of their repayment options. And even those in the know are often confused by the myriad of choices, terms and paperwork required.
…but left out some crucial details. Here they are.
The government isn’t good at marketing
Whatever your political persuasion, we can all probably agree the federal government isn’t adept at slickly covering its sins or loudly touting its successes.
When Obama signed into law “an improved income-based repayment plan” in 2010, it was up to the national media to explain the details in plain English. So media outlets like CBS News (“Who will benefit from Obama’s student loan plan?”) and CNN (“Obama to offer help for students buried in debt”) broke it down.
However, once those stories made their way through the news cycle, they were crowded out by more recent developments. What remained was the government’s own marketing efforts. Yet the U.S Department of Education’s method of advertising its programs is this photo-less web page filled with links that don’t explain much.
I’m glad The Washington Post revisited the topic, and I hope many other media outlets will this year. Because college populations completely turn over every 4-5 years, the publicity campaign can’t ever stop.
The confusion has a solution
With names like “income-based repayment plan” and “graduated repayment program,” the government hasn’t made it easy to figure out where you fit in.
When I explain these programs to people, I tell them to think about their income taxes. The parallels are many.
For starters, the government doesn’t necessarily make it easy to pay your taxes. There are many deductions, and the IRS’ explanations are equally dense. (Check out this web page for Child and Dependent Care Credit.)
While you can do your own taxes — and many people do — you can also pay an accountant to do them for you. Ideally, the accountant will identify deductions that will cover or even exceed his fee.
A similar profession has sprung up around these student loan programs. Student loan professionals consult with you, gather your particulars, and even submit your paperwork to the Department of Education.
Of course, just like tax preparers, there are less-than-ethical practitioners out here — and the national media have covered those, too.
How do you distinguish good from bad? That’s one reason I founded Debt.com. Because I write weekly on this site and you know who I am — and you can find me quoted in national media with just a web search — you know there’s a real guy putting his reputation on the line.
If you want to find out more about these student loan programs, fill out the form above or call 1-800-810-0989. If you don’t get introduced to a professional who offers you a free consultation, email me and I’ll get back to you right away. Deal?
Howard Dvorkin is a CPA and chairman of Debt.com, an educational resource for those who want to conquer all forms of debt in their lives.