Millions of U.S. citizens are burdened with student loans, and it’s been confirmed that federal student loans are one of the largest sources of debt in the nation. Navigating student loan repayment options has always involved red tape and a bit of tedious record keeping. Recently, the White House announced the launch of a website that is supposed to help people with student loans more easily find repayment options.
How the Program Works
The website is part of the U.S. Department of Education and is more of an online tool than it is a program to help students actually repay their loans. Upon visiting the site, you’ll be presented with a series of questions. Based on how you answer the mini-quiz, you’ll be presented with a course of action to take to consolidate your student loans or enter an income driven repayment plan. You’ll be told what materials you need — typically a Social Security number, income information, and information for your spouse — and you’ll be given a list of steps that must be taken in order to sign up and consolidate your student loans or apply for a repayment plan via the website. Here’s where things start to take a turn.
The first step is to create a FSA ID, which is a fairly new creation of the U.S. Department of Education that replaces simply entering your last name and PIN to access the federal student loan online system. If you’re in a hurry to deal with your student loans, know that it will take a day or so to be able to get started — the Social Security Administration has to first verify your account information before you can complete any applications. Wait, it gets better.
After you’re able to start your application to consolidate or get a repayment plan, you’ll be taken through a series of screens where you’ll select your student loans and choose various options. If you’re not eligible for a particular repayment or consolidation plan, you’ll be told what you do qualify for.
Eventually you’ll make it to a screen where you’ll be prompted to enter your IRS account login information. Don’t have one? You’ll need to sign up. Why? The system has to link your federal student loan and Social Security information with IRS records to make sure everything checks out. You’ll transfer your tax return information into the system, enter the information for your employer and two references — that’s right, you need references for this — and then you’ll finally review, confirm, electronically sign, and submit your application.
Seriously, what is this?
Technically, this tool is more useful for the federal government than it is for people with student loans and serves as a way to neatly link the IRS and Social Security Administration with the federal student loan system.
Those who have experience applying for student loan repayment plans know that the processes used by private loan guarantors is typically much quicker and less invasive. No linking to the IRS or Social Security systems is involved, and you get an answer in a relatively short amount of time. If any documents are missing, private student loan guarantors tell you what’s needed and they actually provide real customer service representatives that you can call and speak to in case you run into any issues. Good luck trying to reach someone if you need help while going through this new website and its accompanying tool.
The Real Purpose
The White House admits that the entire website exists to encourage individuals with student loans to consolidate or apply for specific income based repayment plans. The Obama administration aims to enroll at least 2 million more people into federal repayment programs, such as Pay As You Earn, and this website serves as a funnel to get more people to sign up (http://www.usnews.com/news/business/articles/2016-04-28/govt-launches-new-website-for-student-loan-borrowers).
It presents no new solutions nor does it help people with student loans find any relief, unless they’re totally unaware of their options in the first place. If you have student loans but didn’t know that there are consolidation and repayment programs available, the White House’s tool may be of some value.
For the rest of us who have been bombarded with offers to consolidate our student loans for years and have already been on income driven repayment plans, this tool is more of a waste of time than a source of help. However, it does get points for its brevity and the clean design. Speaking of its design, one question does come to mind: how much taxpayer money was spent on this initiative, and how well will it really pay off? If this website manages to dramatically reduce student loan debt and defaults, then it will do some good. However, the White House doesn’t state that those are aims of the program.
And let’s discuss the issue of online security: what precautions has the federal government taken to keep all of the submitted and linked information secure? Haven’t the IRS and Social Security Administration had major website data breeches in the past? Is it really smart to put all of that sensitive personal and financial information in one place for would-be hackers to access? This is definitely a tool that seems to have more drawbacks than it does benefits. That the government aims for this system to eventually take over as a “one stop shop” for student loan management and repayment should also be a point of concern.
A Final Verdict
There’s one important fact that the website doesn’t make clear: income based student loan repayment isn’t always the best option and may end up costing significantly more in the long run due to accumulated interest. If you’ve had trouble keeping up with the balances on your student loans or you’re completely lost on what repayment options are available to you, this new website may give you some insight. However, it’s best if you call up your student loan guarantor and have a talk with a representative, unless you don’t mind linking all of your personal identification and financial information.
If you’re a bit wary about how secure the system is or you don’t want to go through an invasive hassle, skip this tool and simply go to your loan guarantor for help with student loan repayment options and loan consolidation.