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Manage Student Loans With Your Smart Phone? Eh.

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Smartphone_Johan_Larsson_CCFlickrThere are some great mobile apps and phone-friendly websites sites that help us better manage our money and credit, many of which I’ve written about for Credit.com. But I’m not convinced a new mobile service intended to help borrowers manage their student loans is really going to help stem the growing rate of student loan defaults.

Here’s the news: The American Education Services and FedLoan Servicing, now allows borrowers manage and review their student loans and make payments via their smart phones by hopping onto MyFedLoan.org or AESSuccess.org.

[Related Article: Boost Your Credit Score: 7 Helpful Apps]

Here’s the reality: Students are graduating with an average $24,000 in student loans. The amount of student loan debt is—for the first time ever—more than our country’s total amount of credit card debt. The weak job market is making it tough for graduates to find work, and those who are lucky to find work still have a tough time making ends meet, as the cost of living rises faster than wages. It’s no surprise then that the student loan default from 2008-2009 was about 7 percent, compared to 5.2% in 2006—an extremely conservative number in my view. Many more are falling behind on their payments. According to new research from the Department of Education, more than a fourth of borrowers surveyed had fallen behind on their student loans but hadn’t defaulted.

The ability to pay back student loans is not for lack of technology. It’s for lack of money.

Of course, the companies involved don’t pretend their technology is going to solve all the world’s problems with student loans. They’re likely just trying to keep up with the times and do what they can to address what they know is a crisis, which is respectable.

[Related Article: Student Loan Default & Delinquency Rates “Worrisome”]

If only there was more effort placed on creating real, effective solutions to help struggling borrowers either modify their student loans or, I dare say, get a bailout. Federal student loans do have some flexibility, but private loans are still likely to turn into a nightmare if a borrower can’t pay them back. Neither federal nor private student loans are dismissible in a bankruptcy unless you can prove extreme, dire financial circumstance—and even then it’s up for debate.

Image: Johan Larsson, via Flickr.com

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  • http://www.asa.org Allesandra Lanza

    Couldn’t agree more that there should be more effort placed on creating real, effective solutions to help struggling borrowers modify their student loans. I work for one of the agencies (American Student Assistance) that provided data for the student loan delinquency study you cite. The really alarming fact about that study is that 41% of borrowers fell behind on payment before taking advantage of their right to restructure the debt or postpone payment. Lack of money may be preventing student loan borrowers from making the minimum monthly payment under a standard 10-year repayment term, but it’s lack of information that’s causing them to damage their credit reports needlessly with delinquency and default. For federal loans at least, there are numerous options to, if not forgive the debt, at least make it more manageable. The problem is that borrowers just don’t know about them. The government actually has created multiple repayment plans to help struggling borrowers in almost any situation – what’s missing is an effective process for communicating these options to borrowers.

    As for the effectiveness of an app — While it’s true that technology may not solve all student loan problems, it’s also true that the student loan repayment process is overly complicated . . . So anything that simplifies or streamlines things for borrowers is probably a positive.

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  • http://www.credit.com/r/credit-report-card-widgetvanish/af=p90512&ag=CRCwidgetvanish&score=696&tab=personal VICTOR BWAHAMA

    i like to help

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