student loan deferment

A New Way to Figure Out How To Pay Less on Your Student Loans?

If you have federal student loans, you have more repayment options than you probably know about — and the Consumer Financial Protection Bureau wants to tell you all about them.

Last week, the CFPB announced something called the student loan Payback Playbook, a new set of disclosures that student loan servicers would be forced to include on your statements. They would also appear in your account online and in emails from your servicer. The federal agency threw together this example if you want to see how they might look. In a nut shell, you get…

  • the details of what you’re paying now, including how much and how many payments you have left
  • alternative payment plans, including what monthly payments would look like now and in the future
  • information on how to switch plans for free

The goal is to keep student loan payments affordable by publicizing your options. These aren’t new repayment plans, just ones the Education Department hasn’t done a great job of promoting. Ed.gov already had an online calculator you could use to estimate payments and timelines under different plans, but you had to go hunting for it and gather up the information needed to crunch the data. And, of course, you could get it wrong.

Now they’ll be front and center, calculated using information your servicer already has, in the same way the CARD Act of 2009 forced credit card issuers to include 36-month and minimum-payment payoff timelines. It’s so reliable and easy, you won’t even have to use the degree you went into debt for.

Another bonus: You’ll only see the options you’re actually eligible for, instead of the several programs the Education Department offers. If your eligibility changes, the next statement should show the new options. That’s some fresh and much-needed clarity for people on a tight budget and no patience for a federal government website. Some people may only have one alternative, and they don’t need to know the confusing details about help they’ll never get.

The new playbook has elicited support from financial experts, although it’s been tepid. Why?

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“Because there’s really nothing new or innovative here,” says Howard Dvorkin, chairman of Debt.com. “Some people will joke, ‘You expect innovation from the government?’ But our tax dollars are being spent on these efforts, so it’s fair to ask if this playbook is really worth the money.”

For Dvorkin and others, the issue is simple: Ever since the federal government first devised its many programs for alleviating publicly funded student loans, personal finance websites have been explaining the complicated rules.

“I wonder if the Department of Education, if it’s really just concerned with publicizing information, couldn’t have partnered with the existing personal finance community,” Dvorkin says. “It would have been easier and quicker. I’m not knocking what they’re doing, I’m just suggesting alternatives.”

These new disclosures won’t be available right away. They’re up for comment on the CFPB website through June 12. Then the CFPB and the Education Department will look at those comments, make some tweaks, and work on implementing this. You can probably expect to see them in some form next year.

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