Student Loan Debt Collection: Repayment & Refinancing Solutions
By Dan Parks, EVP Operations at Yrefy
Student loan debt continues to hover at all-time highs. While the vast majority of student loan debt is federal student loans, about 9% of student loan debt in the United States is private student loans. In Yrefy’s last student loan blog post, we covered the history and current state of student loans. This blog will focus on the student loan debt impact on borrowers, and how collection agencies can partner with Yrefy to help consumers with private student loan debt.
Federal Student Loans
Overview
42.8 million borrowers have federal student loan debt. The federal loan balance is $1.620 trillion and accounts for 91.2% of all student loan debt. Federal student loans — whether they are performing, delinquent, or defaulted — are all centrally managed by a small group of select servicers (private companies like Nelnet) in partnership with Federal Student Aid, an office of the U.S. Department of Education. The best resource to learn more about student loans is studentaid.gov. There is a loan simulator tab, an option to find the best student loan strategy, and many more valuable resources for borrowers.
Repayment Options
There are lots of federal programs available to federal student loan borrowers. At Yrefy, we generally suggest that if a student loan is federally funded, they should likely keep it that way or be cautious about exploring other options. Refinancing a federal student loan with a private refinancing company eliminates the many options available to federal student loan borrowers such as Income Driven Repayment plans (IDRs), flexible repayment options, and a fixed interest rate.
Private Student Loans
Overview
Private student loans are not eligible for federal student loan forgiveness programs and are subject to private collection policies, which do not always provide as many options as are offered on federally managed student loans. Options for student loan borrowers such as student loan refinancing can be a significant relief to a delinquent borrower’s budget and the overall cost of repayment.
Repayment Options
Consumers with defaulted private student loans generally have more obstacles to getting back on track. Some of those challenges may include borrower confusion regarding the current creditor or balance, negative impact on credit history, interest-only payments, variable interest rates, and less flexibility in the solutions offered for overcoming the debt.
Refinancing Student Loan Debt
Refinancing can be one pathway out of the financial crisis that can come with defaulted student loan debt. While there can be times when federal student loans might be worth refinancing, it’s more often a boon to defaulted private student loan borrowers.
By focusing specifically on private student loans, Yrefy fills a unique niche in helping borrowers find achievable options when the way forward may seem insurmountable. The team comes alongside consumers and establishes a workable plan based on debt and income, allowing consumers to repair credit and conquer debt slowly but surely. Yrefy provides a transparent and honest approach to providing solutions where not many are available.
How Collection Agencies Can Partner with Yrefy
For collection agencies working with consumers facing private student loan debt with high interest rates and high balances, referring the consumer to Yrefy can benefit both the consumer and the agency/creditor. When borrowers are approved for the refinance program, Yrefy provides a low-interest loan for balance payoff and starts consumers on income-based payment plans. This allows borrowers to get out from under impossible debt and improve their credit reports. Success rates are excellent because through responsible, deliberate underwriting and borrower counseling, borrowers understand the critical nature of the situation and are motivated by “seeing light at the end of the tunnel.”
To learn more about student loan refinancing and Yrefy’s programs, check out these related episodes of Receivables Podcast with Dan Parks, EVP of Operations at Yrefy.
About Yrēfy
Yrēfy (pronounced “Why refi”) specializes in delinquent and defaulted private loans. Working with Yrefy assists distressed private student loan borrowers in several ways including potential co-borrower release and a 1% – 6% fixed interest rate refinance option for qualified borrowers, regardless of credit score, and improved credit score over the course of the program. Learn more at yrefy.com.
