Student debt is topping the $1 trillion dollar mark and long surpassed credit card debt as the most common type of balance Americans now carry. With students graduating with an average $24,000 in student loan balances, meeting their obligations is imperative for young adults who want to build a healthy financial foundation and save money for their futures. However, new regulations have created some changes for lenders, many of which are now unloading their student loan programs by selling loans to other lenders.
Both private and federal lenders may sell their balances to other banks, and when this happens, borrowers must take action to ensure they understand where their payments should be sent to avoid costly disruptions, according to Fox Business. There are several ways adults can ensure that their payments are still being directed to the correct location.
First, it’s crucial that individuals open their mail. While this may seem like an obvious piece of guidance, young adults who are locked into a repayment plan may simply toss out statements and other correspondence without opening them because they know how much they owe each month and where to send the bills. However, by not opening mail, they may miss disclosures and other changes to their plan that can cause mistakes.
Second, borrowers who are enrolled in automatic debiting programs will be required to re-authorize their payments with a new lender and possibly re-route payments to a new address. A common mistake some borrowers make is assuming that the new lender will make these arrangements for them and that their payments will be automatically deducted.
This can result in missed or late payments, which not only have a negative effect on a consumer’s credit score, but also put their repayment plans in jeopardy. When borrowers default on federally-backed student loans, the government can void all repayment plan options and demand the full loan amount upfront.
Don’t procrastinate in contacting lenders
The transition to a new lender can require borrowers to sift through a lot of red tape and documents. Young adults who have questions should not hesitate to speak with a representative to ensure they are going about the process correctly. In addition, it’s important to ensure that their current repayment program still stands and that no additional steps must be taken to re-enroll in certain programs. Taking these measures may be time-consuming, but it can save borrowers a great deal of headaches and financial issues in the future.