New Regulatory Change Gives Relief to Federal Student Loan Holders in Default; Houghton Mifflin Harcourt Graduation Debt Author Offers Expert Advice on New Affordable Options for Borrowers and More


BOSTON –  Student borrowers with defaulted loans are finally getting some much-needed relief, and it’s not from President Obama’s new plan, which will not take effect until December, 2015.

Starting on July 1, a new regulatory change by the Department of Education will allow those in default to avoid hefty repayments calculated at the discretion of their loan guarantee agencies. This regulatory change will enable those in default to benefit from a formula similar to one currently available to borrowers not in default, known as the Income-Based Repayment Plan. For an unemployed borrower, the new plan could mean repayments as low as $5.

In the recently released second edition of CliffsNotes Graduation Debt: How to Manage Student Loans and Live Your Life, author and education contributor Reyna Gobel explains and engages with the myriad changes in the student loan industry – such as this new regulatory change – that will affect students and parents burdened with student loan debt.

Regarding the July 1 change, Gobel describes it as the most significant assistance for borrowers in default in decades.

“This change will impact borrowers more than any other repayment plan change could. The previous rule of ‘reasonable and affordable’ payments was arbitrary and, for example, might require someone bringing home less than $2,000 per month in total to pay $200 per month to get out of default,” says Gobel. “With the introduction of this new rule, the payment would be less than $100, which is much more reasonable.”

In CliffsNotes Graduation Debt: How to Manage Student Loans and Live Your Life, readers are encouraged to take action steps, such as tracking long-lost student loans that may have gone into default, identifying affordable payment plans, consolidating loans, and improving credit scores. CliffsNotes Graduation Debt, Second Edition provides a step-by-step road map for effectively managing student loan debt and leading a successful financial life.

Getting out of default isn’t easy – for federal student loan holders in default, it takes nine approved monthly payments within 10 months for a loan to get out, and those in default could face the loss of professional licenses, eligibility for federal jobs, part of their wages via wage garnishment and access to new student loans for graduate school. 

“The latest statistics show a default rate of nearly 15 percent,” Gobel says. “This change, if communicated well, could be the key to getting these borrowers back on the path to repayment.”

About Reyna Gobel
Reyna Gobel, M.B.A., M.J., is a journalist and author who regularly writes for and U.S. News & World Report. She’s been quoted by Money Magazine, Real Simple, and The Washington Post, where Michelle Singletary chose CliffsNotes Graduation Debt as financial book of the month for both the first edition in June of 2010 and the second edition in June of 2014. Her financial advice appears on Wise Bread’s New Graduates Help Center, in her video course How to Repay Federal Student Loans, in CollegeWeekLive newsletters and keynote speeches, and in her audiobook How Smart Students Pay for School, now in its second edition. She lives in Brooklyn.

About Houghton Mifflin Harcourt
Houghton Mifflin Harcourt (NASDAQ:HMHC) is a global learning company with the mission of changing people’s lives by fostering passionate, curious learners. Among the world’s largest providers of pre-K–12 education solutions and one of its longest-established publishing houses, HMH combines cutting-edge research, editorial excellence and technological innovation to improve teaching and learning environments and solve complex literacy and education challenges. HMH’s interactive, results-driven education solutions are utilized by more than 50 million students in over 150 countries, and its renowned and awarded novels, non-fiction, children's books and reference works are enjoyed by readers throughout the world. For more information, visit