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Relief for Americans with Student Debt Complaints

One of the biggest financial complaints I hear from parents is about their adult children’s student debt. It’s a big problem because debt levels are rising faster than salaries. Many young adults with student debt are falling behind. There are some resources available to help.

The student loan and debt situation in the United States has been deemed a crisis by some. Among the indicators the facts that student loan debt exceeded credit card debt in 2010 and auto loans in 2011, and it passed the $1 trillion mark in 2012.

The amount of debt students have upon graduation has been growing in several dimensions. In 1993, about half of 4-year college students had loans and the average amount was about $10,000. In 2016, nearly 70 percent have loans and the average amount is $35,000.

Why the dramatic changes? One is because college costs are rising faster than government grants and other sources of funds. Another is that states now bear much of the burden, which is causing some public schools to have impacted programs where students can’t get required classes so they have to stay in school longer and acquire more debt in order to get a degree.

Exacerbating the problem is the fact that incomes have remained relatively flat since the dot-com crash of 2000. Now, according to student debt advisor Mark Kantrowitz , more than 25 percent of students who take on college debt are graduating with way too much of it. He defines student debt as affordable, “if half of the after-tax increase in income that a student gains from obtaining a college degree is sufficient to repay that student’s loans in 10 years or less.” Using data from Baccalaureate & Beyond Longitudinal Study , Kantrowitz found that 27 percent of college students that have debt have excessive debt.

In the fiscal year 2014, students borrowed approximately $100 billion through federal loan programs. Some 7 million Americans have gone at least a year without making a payment on their federal student loans, and 17 percent of student borrowers are classified as “severely delinquent.” These numbers don’t count the student borrowers from private sources.

The first thing to do if you are in arrears with a lender is to work with the lender to develop a more workable payment plan. If that fails, there are other resources available to help. If you have a federal loan, you can apply for income-based repayment with the U.S. Department of Education’s Federal Student Aid Ombudsman Group. The group has a checklist to use to prepare a complaint. If you have a loan from a private source, you can file a complaint with the Consumer Financial Protection Bureau . The link is to a site that walks you through the process of submitting a complaint to the bureau.

While help is available, it’s important to have realistic expectations when seeking relief. It is extremely unlikely that your debt will go away. You will still have to pay it back, but hopefully in a way that is more manageable. It just may take a longer amount of time.

It’s difficult to start your working life with any debt, let alone debt that is in default or that is growing worse because of missed payments. It’s not a new problem, and you’ve probably heard politicians talking about solutions like free community college for all Americans, or greater government assistance. Those solutions, if they happen at all, will take time. In the meantime, there are programs to support you if you are struggling under a mountain of student debt.

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