New rules help struggling student loan borrowers

by Grace

The Education Department has finalized new rules that can help struggling student loan borrowers by imposing stricter requirements on debt collectors.

One problem has been that some creditors have not been disclosing the most favorable payment options in cases where borrowers want to “rehabilitate” loans that are in default.

In its final rules, the Education Department requires that borrowers who want to rehabilitate loans must first be offered a payment amount similar to what would be offered under the federal income-based repayment program. That option, meant to help borrowers who have high debt in relation to income, caps a borrower’s monthly payments at 15 percent of his or her monthly income….

In addition, some debt collectors had demanded minimum monthly payments without disclosing more affordable alternatives, even though federal student aid law does not require minimum payments. The rules specify that payments in rehabilitation must not be a required minimum amount.

Rehabilitating a loan makes a borrower eligible for additional student aid.  It is hoped that additional borrowing will be accompanied by serious consideration about how the loans will be paid back.

Q&A on the new student loan rules:

■ When do the new rules go into effect?

Most take effect July 1 of next year. But lenders and schools may carry out some of the rules, like the one on forbearances, right away if they choose.

■ Do these rules apply to private student loans?

No. They apply to loans made or guaranteed by the federal government.

■ What if I don’t think I am being offered a fair repayment plan?

Complaints can be made to the Education Department at

Related:  Not enough borrowers take advantage of Income Based Repayment’s ‘mind-boggling’ generous benefits (Cost of College)

2 Comments to “New rules help struggling student loan borrowers”

  1. My personal experience with myeddebt has been far from encouraging. Lodging complaints about GC Services, the assigned collector, has resulted in standardized emails that refer me back to the collector. An AWG was not removed by the agency as originally promised, I was not offered repayment terms based on current wage/debt, and even after receipt of a letter from debt collectors attorney stating GC Services was no longer collecting on my account (during rehab). I have been either ignored (no respone at all) or referred back to GC Services even though they are not collecting.
    Recently, out of the blue, GC Services sent notification of upcoming debit to my account for previously agreed payment. There was never a resolution to the issue with the letter that was written by their “attorney”.
    I have bern embarrased beyond what many could imagine with the AWG as I work in finance and interact with the payroll department staff. During the AWG dispute, Dept of Ed, reacted with “you got yourself into this, it’s your fault for not taking care of your finances, this is your problem, not ours” responses. I was then hung up on by the same person. The second call I was hung up on after hiving my ss # and name. The third call I spent over an hour begging for help, in tears, embarrased, frustrated and left mindful that there was no help available.
    The result of the third phone call, after offering confirmation of a Dept of Revenue garnishment that had been negoiated from 25% to 8% and would be increased back to 25% again due to the AWG in place by Dept of Ed, I was required to contact my payroll dept and request they contact GC Services (although the AWG was issued by Dept of Ed) and confirm the garnishment situation with DOR. Dept of Ed would not accept any documents from me to confirm my situation. To say the least I was and still am embarrassed each time I am in contact with any employee in the payroll dept. Wondering…what do they know or say to each other.My employer called yhe garnishor on the form the following day and was able to suspend as no funds were available due to Dept of Rev having priority. For all that…220.86 was sent to Dept of Ed. In October and still does not show as applied to my account.
    I have since requested GC Services not Service my account as I still have not received the requested information and have been igmored. Myeddebt will not send me the requested information as an email is not a “written” request.
    My student loans were just over 12,500. My balance today is unknown, but depending on who is right, if either one is, 46,000+(Dept of Ed) 55,000+(GC Services).
    A word of caution: Student loans are the worsy debt to ever incur. Stay away! I only wish I understood the ramifications, knew what the small print would actually cost, it sure wasn’t made clear to me.
    Obama has done wonderful things to help with student loan debt, I am one of many that fall hetween the cracks. Is there any relief for yhe many of us who owe much more in fees and interest than the loan?


  2. Thank you for sharing your experience. In particular, the illustration of how a relatively small ($12,500) loan amount can balloon ($55,000) after years of interest and fees.

    You may have checked this already, but I wonder if you qualify for the Income Based Repayment Plan.


%d bloggers like this: