As the 6-month grace period comes to an end for May 2017 graduates, many have jumpstarted the process of repaying their loans, while others don’t know who their loan servicers are, according to new findings by LendEDU.
The report, “A Look Inside the Class of 2017’s Plan for Student Loan Repayment,” is based on the responses of 852 recent graduates on topics related to student loans.
Most borrowers must begin paying off their loans within six months of graduating, and for students who completed degrees in May, that began in November. The poll found that nearly 60 percent of the recent graduates began repaying their student loans while still in school or before the grace period was over.
“This is encouraging, especially for those with unsubsidized federal student loans and private student loans, in which interest accumulates while students are still in school,” according to the study. “Making these non-required payments helps reduce the total cost of interest and can help borrowers understand the repayment process before they are forced into it.”
While the class of 2017 appeared to have a “decent” understanding of their student loans, such as interest rates and loan balances, the poll found that about 40 percent didn’t know who their loan service providers were nor had they logged in to their student loan accounts since graduating.
Borrowers' servicers are their keys to success. If they need to miss a payment, are facing financial hardship, or want to strategically make extra payments, they will need to work with their servicers,” according to the report. “Simply knowing who their servicers are would be a great first step to take to ensure everything goes smoothly once repayment starts.”
The poll also found that nearly 60 percent of students plan to have their student loans forgiven, either after completing a 20 to 25-year repayment plan or after 10 years of work in the public sector through the Public Student Loan Forgiveness program. Ultimately, however, not all of these students will be able benefit from loan forgiveness.
“The likelihood of over half of borrowers having their debt forgiven is very unlikely- there simply aren’t enough public service and non-profit jobs that would qualify for forgiveness,” according to the report.
The study noted that these numbers are concerning because it may deter students from actively trying to repay loans if they believe they won't be required to complete the payment in the future.
Other notable findings include that 40 percent of students are relying on their parents to help repay their loans, and that over half of students plan to refinance their loans. Of those students who plan to refinance loans, however, two-thirds said they would only do so if the federal government offered it, which is currently not in practice.
The final question of the poll, "how would you grade yourself on your knowledge about and readiness to repay your student debt?” bore extremely optimistic answers. Over 60 percent of students graded their knowledge as an ‘A’ or ‘B.’
“During a time when it seems like the media only covers borrowers struggling to repay their debt, it is refreshing to see that a good portion of the newest group to enter repayment are confident that they will be successful,” according to the report. “Hopefully these borrowers have done their research and have a good understanding of what will be required of them in the coming years as opposed to just having blind confidence. It is crucial for the Class of 2017 to be successful in repayment with outstanding student debt at an all-time high and default rates going up.”
Publication Date: 11/16/2017