With Student Loan Debt Reaching Crisis Level, the NFCC Aims to Help
Posted By Donna Fuscaldo on January 26, 2016 at 1:56 pm
There’s no question the student loan situation in the U.S. has reached crisis levels. Many borrowers are struggling with colossal amounts of debt, not sure where to turn for help. At last count, total student loan debt in America stood at $1.3 trillion, with 43 million people stuck with at least one student loan. And it doesn’t help that many graduates are still finding themselves unemployed or underemployed with little means to cover their rent, let alone hundreds of dollars in student loan bills each month.
However, the student loan debt problem doesn’t stop there. The effects are spilling over into other areas of people’s financial lives and preventing them from buying homes, purchasing cars, getting married and starting families. It’s even causing many people to put off saving for retirement, which can have long-term ramifications – not only for their own personal situation but for the entire economy.
NFCC wades into student loan counseling
Aiming to help people tackle this growing problem, the National Federation of Credit Counselors recently announced it was getting into the student loan counseling business. Operating under the assumption that there is little help for student borrowers, the NFCC began providing member counselors with training and a certificate program to get them up to speed with the student loan programs available to people in need of help. The training includes the full suite of student loan programs associated with repayment, including forbearance and other loan modification options.
“We’ve created a set of comprehensive standards for certification and training,” says Bruce McClary, a spokesman for the National Foundation for Credit Counseling. “We are leveraging the network of NFCC member agencies that already have consumer credit and housing counseling, and we are training and certifying them to add student loan counseling.”
Student loan debt the next financial crisis driver?
While the student loan debt problem has been ongoing for some years now, the NFCC argues that it could be the driver of the next major financial crisis. As a result, the organization is stepping up its efforts to help. According to the NFCC, 7.3 million student loan borrowers are at least 90 days delinquent on their loans, 5 million are in default and millions more are in negatively amortizing income-driven repayment plans. All of that means borrowers aren’t spending money in other areas of their lives.
While there is a lot of government help out there for student loan debt holders, there isn’t one established student loan counseling provider or program. It’s also an area that has been rife with misleading information and even scams. In December of 2014, the Consumer Financial Protection Bureau shut down the debt relief company College Education Services for illegally marketing their student debt relief services. According to the complaint, College Education Services charged illegal advance fees, falsely promised lower payments and inaccurately claimed that borrowers could have quick relief from default or wage garnishment. In a 2015 report, the CFPB cited student loan debt collection among the five highlighted areas where investigators have found legal violations.
NFCC members do charge a fee for their services, but because it’s a non-profit, McClary says the fees are structured to be affordable and accessible to everyone. Anyone looking for help should go with an organization that is a designated 501C non-profit and is in good standing with the Better Business Bureau, notes McClary.
In-need borrowers get a holistic approach to solving problem
So – what will struggling student borrowers get out of this new service from the NFCC? According to McClary, an overall look at their finances and a holistic approach to fixing the situation. Because student loan debt can negatively impact many aspects of a person’s life, McClary says a better approach to tackling the problem is looking at the overall picture rather than just bits and pieces. That’s the reason the NFCC waited until now to add student loan counseling to its services offered. “The main objective was to deliver a quality service and to do that we had to build a service overtime,” says McClary. “Others in the sector responded like it was a fire drill and rolled out quickly, but what was put forward wasn’t comprehensive.”
Borrowers who visit an NFCC counselor will first have their personal financial situation thoroughly reviewed, similar to services provided when getting housing or credit counseling. After that, the counselor will look at different programs for borrowers who can’t afford to pay back their student loans. By incorporating overall personal finance into the student loan component, a counselor can come up with ways to reduce debt load or otherwise create a more tenable situation. “If there [are] issues with the student loan debt, a lot of times they fall behind,” in other areas like credit cards or their mortgage, says McClary. “The counselor can offer a multi-pronged approach to come up with useful solutions for the borrower.”