A large segment of student loan borrowers in the United States is shelling out more money than required every month. Financial experts point to a critical lack of awareness about existing government relief programs as the primary reason for this unnecessary financial strain.
Widespread Ignorance About Federal Relief Options
Certified financial planners highlight that numerous borrowers could significantly slash their monthly instalments or even get parts of their debt cancelled. This is possible by enrolling in federal repayment or forgiveness schemes. However, a recent survey conducted by The Institute for College Access & Success (TICAS) reveals a startling information gap.
The data shows that 15% of federal student loan borrowers have heard "nothing at all" about income-driven repayment (IDR) plans. Furthermore, nearly a quarter (23%) were unaware of the Public Service Loan Forgiveness (PSLF) program. Most concerning is that 47% had no knowledge of programs that cancel loans for borrowers with disabilities.
"Many borrowers end up paying more than necessary simply because they aren't aware of the full range of relief options available to them," stated K.C. Smith, a managing associate at Henssler Financial, in a discussion with CNBC.
How Income-Driven Plans Can Lower Payments to Zero
Income-driven repayment plans are a cornerstone of federal relief. These IDR plans cap monthly payments at a percentage of a borrower's discretionary income. Any remaining balance is forgiven after 20 to 25 years of consistent payments.
"For those with federal student loans, evaluating whether they qualify for an income-driven repayment plan can be an important way to improve cash flow," advised Smith. Depending on an individual's financial situation, some borrowers may even qualify for monthly payments as low as $0.
Michele Zampini of TICAS emphasised that for many, "enrolling in an income-based repayment plan that lowers their monthly payment is often the only way a borrower can afford to stay out of default." Borrowers can apply for an IDR plan through the official StudentAid.gov website.
Forgiveness Programs Still Open for Eligible Borrowers
Despite political and legal changes over the years, the U.S. Department of Education continues to offer several forgiveness pathways. The prominent Public Service Loan Forgiveness (PSLF) program clears federal loans for eligible government and non-profit employees after 10 years of qualifying payments.
Another key program is Teacher Loan Forgiveness (TLF), which offers up to $17,500 in forgiveness for full-time teachers serving for five consecutive years in qualifying low-income schools. Additionally, loan cancellation is available for borrowers whose schools closed unexpectedly or for those who develop a severe disability.
Experts recommend exploring options on Studentaid.gov or through The Institute of Student Loan Advisors, which maintains a state-specific database of programs.
Millions at Risk of Default Without Intervention
The stakes of this awareness gap are high. Currently, over 5 million U.S. borrowers are in default on their federal student loans. Michele Zampini warned that this number could soar to nearly 10 million under certain administrative scenarios, compounded by labour market instability.
Understanding and enrolling in the appropriate repayment or forgiveness program can be a financial lifeline. These federal options empower eligible borrowers to reduce payments, avoid the severe consequences of default, and in many cases, eliminate their debt burden entirely.
