ROHNERT PARK, Calif., March 28, 2018 /PRNewswire/ -- Some recent statistics about the prevalence of defaulting on federal student loans makes it sound quick and easy. However, borrowers may confuse delinquency and default. Delinquency means that a borrower is even just one day late on a payment. Federal loans are not considered to be in default until payments have not been made for at least 270 days — that's roughly nine months. Ameritech Financial, a document preparation company that assists with federal repayment plan applications, urges borrowers to take action if they are on track to default on their federal student loans.
"Falling behind on payments for federal student loans can impact credit in ways that can prevent borrowers from taking out credit for things like a car or a house," said Tom Knickerbocker, executive vice president of Ameritech Financial. "But when payments are unmanageable, borrowers may feel that default is inevitable. I'm here to remind them that it is not."
Recent reports have described that default has more to do with institutions and student characteristics than levels of debt. For example, students who attended for-profit institutions and those who are black are more likely to default on their loans than their peers. Additionally, the report predicted that default rates will worsen as repayment progresses: for the 2004 entry cohort, it is expected that nearly 40 percent will default by the year 2023.
However, even for those who may be at risk of defaulting, whether they represent the groups that default at higher rates or not, there are federal options geared towards preventing default. Short-term solutions may be to enter into deferment or forbearance. However, borrowers considering these options should know that interest may still accrue during those delays and once the loans re-enter repayment, that interest will capitalize and may increase the monthly payments.
Long-term solutions for those who cannot afford their payments include the various income-driven repayment plans (IDRs). Such programs calculate payments as a percentage of discretionary income, which uses income and family size, and may end in forgiveness after 20 to 25 years, as long as the borrower remains in the program for the full term. Borrowers should be aware that whenever they switch to a different repayment plan, any accrued interest will capitalize. Ameritech Financial helps borrowers understand and apply for such plans by helping clients gather documents and fill out the appropriate paperwork to send to their loan servicer.
Federal borrowers who have already defaulted must take action to get out of default before they can take advantage of the aforementioned options for managing their loans. They can either pursue a default rehab program through the Department of Education or take a consolidation route. Each option has its own pros and cons and should be thoroughly considered before choosing one.
"Delinquency and default are bad, but they are not inevitable and they are not unmanageable," said Knickerbocker. "At Ameritech Financial, we speak to borrowers who are in varying degrees of delinquency and help them get on a path to successful repayment through IDRs."
About Ameritech Financial
Ameritech Financial is a private company located in Rohnert Park, California. Ameritech Financial has already helped thousands of consumers with financial analysis and student loan document preparation to apply for federal student loan repayment programs offered through the Department of Education.
Ameritech Financial is a member of the Association for Student Loan Relief (AFSLR), and each representative on the phone has received the Certified Student Loan Professional certification through the International Association of Professional Debt Arbitrators (IAPDA).
Ameritech Financial prides itself on its exceptional customer service.
To learn more about Ameritech Financial, please contact:
5789 State Farm Drive #265
Rohnert Park, CA 94928
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SOURCE Ameritech Financial