Redisclosure Makes It Harder To Pay Off Your Student Debt

Paying extra on your student loans may not get you ahead

Shaun Plum
MoneyTips Contributor

Borrowing Student Loans

Redisclosure Makes It Harder To Pay Off Your Student Debt
October 3, 2016

People who graduate from college and get a well-paying job often try to pay more towards the student loan principal each month to pay off their debt quicker. While this is great for the borrower, student loan service companies then miss out on the amount of interest they make from these loans. To counter this, servicers may put the loan through redisclosure. This process recalculates the borrower's minimum payment so that the loan will continue through its original term. If the borrower decides to pay only the amount due each month, they will end up paying more in interest charges.

It is currently not known how many borrowers' loans have been redisclosed, but the Consumer Financial Protection Bureau estimates that it could be as many as several million. These borrowers are not all recent graduates - some have been out of college for ten years or more and are still trying to pay off their student loan debt.

All of these borrowers assume that by paying extra, they will be able to get out of debt faster. This is true if they continue paying a good amount towards the debt, but if they go back to paying only the least amount due, they will not get ahead. Servicing companies often redisclose the terms of the loan without the consumer's consent.

Find out quickly at what rate you can refinance your student loan.

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