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7 Top Student Loan Moments From the Past Decade

January 6, 2020

2019 has come to an end, which means it’s the end of another decade. The past 10 years have been staggering in terms of changes to the student loan system. From 2010 through 2019, student loan debt reached an all-time high, new repayment plans were introduced, and the Department of Education cracked down on for-profit schools. Here are seven of the most significant student loan moments of the past decade.

1. The government introduces changes to income-driven repayment plans

Income-driven repayment (IDR) plans were first introduced in 1994. With an IDR plan, federal loan borrowers could reduce their monthly payments, making the payments more affordable. But over the past 10 years, the Department of Education made significant changes to IDR plans

  • Pay As You Earn: In 2010, the government introduced Pay As You Earn (PAYE). Under this program, borrowers’ payments would be capped at 10 percent of their discretionary income, and they would receive loan forgiveness after making payments for 20 years. 
  • Income-Based Repayment: The government updated Income-Based Repayment (IBR) in 2014. With the new guidelines, borrowers would pay 10 percent of their discretionary income, and receive loan forgiveness after 20 years. Only available to borrowers who took out loans after July 1, 2014, the payments under the new IBR plan would never exceed what the payment would be under a 10-year Standard Repayment Plan. 
  • Revised Pay As You Earn: The Department of Education launched Revised Pay As You Earn (REPAYE) in 2015. With REPAYE, borrowers’ payments are limited to 10 percent of their discretionary income. For undergraduate borrowers, the loans would be forgiven after making payments for 20 years. For graduate borrowers, the loans would be forgiven after 25 years.

 

2. National default rate reaches 11.5%

In 2014, the national federal student loan cohort default rate — a measure of how many borrowers of Federal Family Education Loans or William D. Ford Federal Direct Loans defaulted on their debt — hit 11.5%, an all-time high. Of the millions of students who entered repayment, hundreds of thousands defaulted on their loans, meaning they didn’t make payments for at least 270 days. 

 

According to the most recent data, the default rate has decreased slightly to 10.8%. However, student loan default remains a major issue for thousands of borrowers amidst the student loan debt crisis.

 

3. Department of Education announces Borrower Defense to Repayment

Over the past 10 years, several for-profit schools have been sued due to misleading tactics. Millions of students were left with student loans and a degree that couldn’t help them secure a job. 

 

In 2016, then-President Obama’s administration announced new regulations that were designed to protect borrowers from institutional misconduct. Called Borrower Defense to Repayment, the new regulations allowed borrowers to have their loans discharged if the school was found guilty of fraud, or if the school gave the borrower misleading information. 

 

Borrowers who think they are eligible can apply for Borrower Defense to Repayment online.

 

4. First borrowers become eligible for loan forgiveness through Public Service Loan Forgiveness

In 2017, the first borrowers became eligible for loan forgiveness under Public Service Loan Forgiveness (PSLF). While the program was launched in 2007, borrowers have to work for a qualifying non-profit organization or government agency for 10 years while making payments on their loans to be eligible for PSLF. 

 

Was the program successful? That depends on your perspective. As of June 2019, over 90,000 borrowers submitted PSLF applications. But to date, only 1,216 applications for loan forgiveness have been approved.  That means 99% of PSLF applicants are rejected. 

 

5. Student loan debt crosses $1.5 trillion mark

In the first quarter of 2018, the national outstanding student loan debt reached $1.5 trillion for the first time in history. If that doesn’t sound that remarkable to you, consider that the total outstanding loan debt was just $600 billion a decade ago. In only 10 years, national student loan debt more than doubled. 

 

Student loans are more prevalent than ever. According to The Institute for College Access & Success, 65 percent of college seniors who graduated from public and private colleges in 2018 had student loan debt. On average, borrowers had $29,200 in student loans.

 

6. Several for-profit schools close down

Over the past decade, for-profit schools have faced increased scrutiny and pressure from the U.S. Department of Education. As a result, several of the biggest for-profit schools closed down. 

 

  • Corinthian College: A school that operated 28 campuses across the country, Corinthian College closed in 2015. The closure came after the Department of Education fined the school for misrepresenting job placement rates. Over 16,000 students were affected. 
  • ITT Tech: In 2016, ITT Tech shut down its 130 campuses, impacting over 43,000 students. The closure came after multiple federal sanctions and after the Department of Education prohibited the school from enrolling new students who use federal financial aid. Students affected by the closure could pursue closed-school discharge, with over $500 million in federal student loans at stake. 
  • Education Corporation of America: In 2018, the Education Corporation of America shut down its 70 campuses, leaving over 19,000 students scrambling for solutions. The closure occurred after the Accrediting Council for Independent Colleges and Schools suspended the school’s accreditation over concerns about institutional management and student progress. 

 

7. President Trump grants automatic loan forgiveness to disabled veterans

In 2019, President Trump signed a Presidential Memorandum to help totally and permanently disabled veterans with their student loans. With the new process, the Department of Education would automatically forgive the federal loan balances belonging to eligible veterans under Total and Permanent Disability Discharge

 

Previously, veterans could qualify for Total and Permanent Disability Discharge. However, the process required veterans to know about the program and fill out extensive paperwork. Under President Trump’s order, their loans were eliminated automatically, simplifying the discharge process.

 

timeline of top student loan moments from the 2010s decade Timeline depicting the top student loan moments from the past decade.

Looking ahead

The past decade produced major changes to the student loan systems. As the 2020 election nears, more and more politicians will be paying attention to student loan issues since they impact millions of borrowers. Many presidential candidates will be introducing their educational policy proposals, which could signal new changes for borrowers in the next few years.

 


 

Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

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2020-08-05
How to Ask Your Employer to Help Pay Student Debt

These days, employers offer all kinds of benefits to keep employees, from kombucha on tap and innovative new office spaces to ping pong tables and video game rooms. The list of benefits seems to grow all the time.   When you think about it, though, how much do you really need that kombucha on tap? Instead, what many graduates need is help with their ever-mounting student loans. In combination with other methods of dealing with student loan debt, employers can play a valuable role in ensuring their employees’ financial stability.   Employers are beginning to recognize this trend, as well. That’s why some have begun to offer help to employees with student loan debt. While an uncommon practice at the moment, some companies now offer options to help employees pay back their student loans.   The practice is rapidly becoming more popular, and if you’re lucky, your employer may already offer a student debt relief program. Here are several ways employers are already helping to reduce their employees' student loan debt.  

Financial Education

Employers have begun to understand that their own financial success is tied to the financial success of their employees. As a result, some employers have begun to offer financial education opportunities.   These opportunities come in many forms, including workshops, webinars and even counseling. While many employees already have a firm grasp on financial concepts, these programs can still be incredibly beneficial to those weighed down by student debt as they often cover lesser-known tactics and reinforce familiar strategies.  

Student Loan Repayment Signing Bonuses

Another method of helping employees with student debt is the signing bonus. For example, some companies offer $1,000 towards student loans for new hires. This $1000 can drastically reduce the amount graduates pay in interest over the life of their student loans and is an effective way for companies to hire and keep dedicated, hardworking employees.  

Employer Repayment

The most exciting benefit employers are beginning to adopt is direct assistance with student loans. Now, in addition to savvy fiscal advice, some companies are backing up their support with dollars and cents.   A few companies now offer yearly bonuses to help pay back student loans. One of the most generous of these companies is Nvidia. Employees earn $6,000 a year towards their student loans up to a $30,000 maximum. Several companies offer comparable or lower amounts. Regardless of the repayment amounts, this innovative strategy provides a new way to fight back against student debt.   A variation of this policy is occasionally used, as well. In this variation, employees who don’t take their PTO can trade their PTO days for student loan assistance. With many in the United States not taking their PTO days anyway, this is a compelling option for student loan borrowers.  

Contributions to 401(k) Plans

It may seem strange for 401(k) contributions to go hand-in-hand with paying off student debt. You might even expect to have to choose between them.   If you’re employed by Abbott Laboratories, though, you don’t have to choose. Employees who contribute at least 2% of their pay toward student loans are eligible for the full 5% employer matching in their 401(k), even if they do not otherwise contribute to their 401(k). Abbott Laboratories is the first company to offer this incentive to help employees to pay off student debt, and hopefully many companies will follow in their footsteps.   Sadly, these types of programs are not as commonly offered as they should be, but that isn’t necessarily bad news for you.   If student loan assistance programs are something that you would like to see at your company, then make an appointment to speak with either your boss or to human resources. In this day ¬¬¬¬¬and age, the competition for the best employees is fierce, and employers are always looking for ways to keep employees happy. In some cases, it may even be cheaper than a raise.   It’s also worth mentioning your interest in such programs while negotiating your salary and benefits package for a new job. They may include it as an additional benefit.   If your employer already provides these benefits, that’s fantastic! You’re already one step closer to being unburdened by student debt. If you're curious about how to finish the job and free yourself from student debt completely, one great way to do that is Student Loan Refinancing. You can learn more here.  
  Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.
calculator showing interest
2020-08-04
Student Loans: What is the Difference Between a Principal and an Interest Payment?

If you’re planning on going to college, you should be prepared for potentially high costs. The average cost of tuition and fees at a public four-year university for an in-state student is $10,440, while it’s $36,880 at a private school.    By Kat Tretina   While those numbers are pricey enough on their own, financing can add to the expense. If you borrow money to cover the total cost of attendance, you’ll end up repaying more than you initially borrowed because of interest charges — what lenders charge you in exchange for lending you money.    When dealing with student loans, it’s important to understand how student loan interest rates affect your repayment and how your extra payments are applied to your debt.   

How Student Loan Interest Rates Affect Your Loan Balance

Student loan interest rates can cause your loan balance to grow over time. The higher the rate, the more interest that accrues.    For example, if you took out $30,000 in student loans and qualified for a 10-year loan at 4% interest, you’d pay $6,448 in interest charges on top of the $30,000 you borrowed.    But if you qualified for a $30,000 loan at 5% interest — a difference of just 1% — you’d pay $8,184 in interest charges. The extra percentage point would cause you to pay over $1,700 more in interest charges.    However, you can cut down on interest payments by paying off your debt ahead of schedule. When you pay off your loans early, less interest accrues over your loan's life, allowing you to save money.   

The Difference Between Principal and Interest Payments

When you enter into repayment, your loan payments cover two different aspects: 
    • Interest: Interest that has accrued to date
    • Principal: The original loan amount
  When you make a payment, lenders typically apply the payment to any fees first, such as late fees or returned payment fees, then to interest charges. If any money is left over, they will apply the excess to the principal balance.   

Education Loan Finance Student Loan Repayment Options

If you take out private student loans from ELFI*, you can choose from the following repayment options: 
    • Immediate repayment: You make payments toward the principal and interest right after disbursement
      • Best for: You’re working while in school and can afford the payments. You want to pay the least amount of interest possible. 
    • Interest only: While you’re in school, you make payments that only cover the interest that accrues on the loan. 
      • Best for: You can’t afford to make full payments, but you want to minimize interest charges. You’re working part-time or have some income while in school. 
    • Partial payment: With partial payments, you make a flat-rate payment — typically $25 — while you’re in school. 
      • Best for: Money is tight while you’re in school, but you want to chip away at some of the interest that accrues. 
    • Fully deferred: If you opt for fully deferred repayment, you don’t make any payments at all while you’re in school. This is the most expensive repayment option, as more interest accrues over the life of the loan. 
      • Best for: You are in a rigorous academic program and need to completely focus on your studies, so you don’t want to make any payments while in school. 
  Use the private student loan calculator to see what your payment would be and how much you’d repay over the life of the loan under each repayment plan.*   

Student Loan Repayment Strategies to Pay Off Your Debt Faster

Once you graduate, there are ways to accelerate your debt repayment and reduce the amount of interest that accrues.   

1. Make Extra Payments

If you want to pay off your debt faster and are thinking about different student loan repayment strategies, consider increasing your minimum monthly payments.    More of your payment will go toward the principal each month, reducing how much you’ll pay in interest and allowing you to pay off the debt ahead of schedule.    For example, if you had $30,000 in student loans at 5% interest and a 10-year repayment term, your monthly payment would be $318 per month. If you only made the minimum payments, you’d repay a total of $38,192 by the end of your loan term.    If you increase your payments to $368 per month — an addition of just $50 per month — you’d pay off your loans 20 months early. And, you’d repay just $36,731. By adjusting your monthly payment, you’d save $1,461.   

2. Use the Debt Avalanche or Debt Snowball Methods

If you have multiple student loans, consider using either the debt avalanche or debt snowball method to tackle your debt.    With the debt avalanche method, you make extra payments toward the loan with the highest interest rate.    With the debt snowball, you target the debt with the lowest balance first.    Which is best for you? It depends on your goals and personality. Learn more in our breakdown of the debt snowball and debt avalanche method repayment strategies  

3. Refinance Your Debt

Student loan interest rates have a big impact on your overall repayment. By refinancing your student loans,* you can qualify for a lower interest rate so more of your monthly payment goes toward the principal. Over time, refinancing can help you save a significant amount of money.   

The Bottom Line

By understanding how payments work and how student loan interest rates affect your total repayment, you can pick a repayment plan that works for you.    If you still have questions, ELFI’s Personal Loan Advisors can walk you through the loan application process and answer any questions you have.*  
  *Subject to credit approval. Terms and conditions apply.   Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.
woman reading new about student loans
2020-07-31
This Week in Student Loans: July 31, 2020

Please note: Education Loan Finance does not endorse or take positions on any political matters that are mentioned. Our weekly summary is for informational purposes only and is solely intended to bring relevant news to our readers.

  This week in student loans:
white house

Trump: Student Loans May Be Suspended For “Additional Periods Of Time”

With a second stimulus package on the way, Trump has stated that student loan suspensions may be extended past the already in place deadline.  

Source: Forbes

 

GOP Coronavirus Relief Proposal

Here’s How the Latest GOP Coronavirus Relief Proposal Would Impact Student Loans

The GOP has released their coronavirus relief proposal, but experts claim that it is largely ineffective in helping student loan borrowers.  

Source: CNBC

 

student loan servicers

What to Know About Changes Coming to Student Loan Servicing

In an attempt to streamline student loan servicing, the US government has signed contracts with five companies to provide customer service and back-office support to federal student loan borrowers.  

Source: U.S. News & World Report

 

man researching whether to refinance student loans

Should You Refinance Student Loans? What to Consider as Legislators Debate New Stimulus Package

Refinancing rates are incredibly low, but due to the second stimulus package not yet being put in place, student loan borrowers are unsure of when the best time to refinance will be.  

Source: Newsweek

  That wraps things up for this week! Follow us on FacebookInstagramTwitter, or LinkedIn for more news about student loans, refinancing, and achieving financial freedom.  
 

Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.