Tag: education loans

After being in place for more than three years, the student loan payment pause is scheduled to end 60 days after June 30, with payments resuming soon after. As borrowers brace for this return, there are many things that loan servicers and lenders should take note of, including: Potential risk factors demonstrated by borrowers. About one in five student loan borrowers show risk factors that suggest they could struggle when scheduled payments resume.1 These include pre-pandemic delinquencies on student loans and new non-medical collections during the pandemic. The impact of pre-pandemic delinquencies. A delinquent status dating prior to the pandemic is a statistically significant indicator of subsequent risk. An increase in non-student loan delinquencies. As of March 2023, around 2.5 million student loan borrowers had a delinquency on a non-student loan, an increase of approximately 200,000 borrowers since September 2022.2 Transfers to new servicers. More than four in ten borrowers will return to repayment with a new student loan servicer.3 Feelings of anxiety for younger borrowers. Roughly 70% of Gen Z and millennials believe the current economic environment is hurting their ability to be financially independent adults. However, 77% are striving to be more financially literate.4 How loan servicers and lenders can prepare and navigate Considering these factors, lenders and servicers know that borrowers may face new challenges and fears once student loan payments resume. Here are a few implications and what servicers and lenders can do in response: Non-student loan delinquencies can potentially soar further. Increased delinquencies on non-student loans and larger monthly payments on all credit products can make the transition to repayment extremely challenging for borrowers. Combined with high balances and interest rates, this can lead to a sharp increase in delinquencies and heightened probability of default. By leveraging alternative data and attributes, you can gain deeper insights into your customers' financial behaviors before and during the payment holidays. This way, you can mitigate risk and improve your lending and servicing decisions. Note: While many student loan borrowers have halted their payments during forbearance, some have continued to pay anyway, demonstrating strong financial ability and willingness to pay in the future. Trended data and advanced modeling provide a clearer, up-to-date view of these payment behaviors, enabling you to identify low-risk, high-value customers. Streamlining your processes can benefit you and your customers. With some student loan borrowers switching to different servicers, creating new accounts, enrolling in autopay, and confirming payment information can be a huge hassle. For servicers that will have new loans transferred to them, the number of queries and requests from borrowers can be overwhelming, especially if resources are limited. To make transitions as smooth as possible, consider streamlining your administrative tasks and processes with automation. This way, you can provide fast and frictionless service for borrowers while focusing more of your resources on those who need one-on-one assistance. Providing credit education can help borrowers take control of their financial lives. Already troubled by higher costs and monthly payments on other credit products, student loan payments are yet another financial obligation for borrowers to worry about. Some borrowers have even stated that student loan debt has delayed or prevented them from achieving major life milestones, such as getting married, buying a home, or having children.5 By arming borrowers with credit education, tools, and resources, they can better navigate the return of student loan payments, make more informed financial decisions, and potentially turn into lifelong customers. For more information on effective portfolio management, click here. 1Consumer Financial Protection Bureau. (June 2023). Office of Research blog: Update on student loan borrowers as payment suspension set to expire. 2Ibid. 3Ibid. 4Experian. (May 2023). Take a Look: Millennial and Gen Z Personal Finance Trends 5AP News. (June 2023). The pause on student loan payment is ending. Can borrowers find room in their budgets?

For members of the U.S. military, relocating often, returning home following a lengthy deployment and living with uncertainty isn’t easy. It can take an emotional and financial toll, and many are unprepared for their economic reality after they separate from the military. As we honor those who have served our country this Veterans Day, we are highlighting some of the special financial benefits and safeguards available to help veterans. Housing Help One of the best benefits offered to service members is the Veteran’s Administration (VA) home-loan program. Loan rates are competitive, and the VA guarantees up to 25 percent of the payment on the loan, making it one of the only ways available to buy a home with no down payment and no private mortgage insurance. Debt Relief Having a VA loan qualifies military members for a Military Debt Consolidation Loan (MDCL) that can help with overcoming financial difficulties. The MDCL is similar to a debt consolidation loan: take out one loan to pay off all unsecured debts, such as credit cards, medical bills and payday loans, and make a single payment to one lender. The advantage of a MDCL? Paying a lower interest rate and closing costs than civilians and far less interest than paying the same bills with credit cards. These refinancing loans can be spread out over 10, 15 and sometimes 30 years. Education Benefits The GI Bill is arguably the best benefit for veterans and members of the armed forces. It helps service members pay for higher education for themselves and their dependents, and is one of the top reasons people enlist. Eligible service members receive up to 36 months of education benefits, based on the type of training, length of service, college fund availability and whether he or she contributed to a buy-up program while on active duty. Benefits last up to 10 years, but the time limit may be extended. Saving & Investing Money According to the Department of Defense’s annual Demographics Report, 87 percent of military families contribute to a retirement account. Service members who participated in the Thrift Savings Plan, however, are often unaware of their options after they separate from service, and many don’t realize the advantages of rolling their plans into an IRA or retirement plan of a new employer. Safeguarding Identity Everyone is a potential identity theft target, but military personnel and veterans are particularly vulnerable. Routinely reviewing a credit report is one way to detect a breach. The Attorney General's Office provides general information about what steps to take to recover from identify theft or fraud. Today is a great time to consider ways to support your veteran and active military consumers. They are deserving of our support and recognition not just today but continuously. Learn more about services for veterans and active military to understand the varying protections, and how financial institutions can best support military credit consumers and their families.