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The Consumer Financial Protection Bureau recently took a look at our
It isn't looking too good.
Out of $1 trillion in federal loans, $214 billion are in deferment or forebearance and $89 billion are in default.
It's the 7 million borrowers in default that really have the CFPB worried.
"Defaulting on a federal student loan has serious consequences," Rohit Chopra, the bureau’s student loan ombudsman, says. "Unlike other consumer credit, borrowers in default on a federal student loan might see their tax refund taken and their wages garnished without a court order."
No kidding.
Earlier this year, we spoke with Florida mother Alice Cortes, who is on the hook for $25,000 worth of
"I can't afford what they're doing to me," she told us. "I don't want to live with my son. He needs a life that's separate and apart and they've made it damn near impossible for that to happen at this point."
In Cortes' case, there is no way out, especially since she is on the hook for private student loans.
Borrowers who have taken out federal loans have far more options for flexible repayment, such as income-based repayment plans, deferment, loan consolidation, and rehabilitation plans.
But from the findings in the CFPB report, it's becoming apparent that millions of borrowers are missing out.
A mere 40,000 consumers are enrolled in the federal income-based repayment plan, Pay As You Earn, which can lower payments to just 10% or less of annual income for borrowers with loans issued after 2011.
"If borrowers were aware of and able to easily enroll in income-based plans through their servicer, many federal student loan defaults could have been avoided," Chopra says.
All you need to know about options for paying down student loans can be found here: http://www.consumerfinance.gov/students/