Guiding Principles

Through the application of these guiding principles, borrowers will be able to expect a high level of service and accountability from nonprofit, state-based, and state-chartered organizations (hereafter EFC members) who make education loans, including support services as well as timely and accurate responses to inquiries and complaints.

Encourage Smart & Responsible Borrowing

EFC members encourage families to make the best possible decisions for their individual circumstances. To this end, EFC members that make education loans should:

• Encourage students to exhaust their grant and scholarship aid, Federal Direct Stafford Loans and Federal Direct Unsubsidized Stafford Loans, and available family resources before taking out any other type of in-school loan.
• Educate families on how Federal Parent PLUS Loans differ from Federal Stafford Loans, including that Parent PLUS Loans lack access to income-driven repayment plans and forgiveness programs, the loans are the responsibility of the parent, and they have higher fees and interest rates than other federal student loans.
• Clearly communicate the pros and cons of refinancing a federal loan into a non-federal loan, including the loss of federal benefits.
• For private in-school loans, require that schools certify the enrollment, cost of education, and financial aid of each borrower to avoid unintentional over-borrowing. 
• Advise students and families to borrow only the amount they need. Selecting and paying for college is a family decision and, as such, the student and family need to understand the total cost of the college selected. Family members borrowing on behalf of a student or cosigning a student loan should be counseled to understand their rights and responsibilities in regard to repaying education loan debt.

Help For Borrowers In Distress

EFC members work closely with borrowers experiencing personal hardship or financial difficulties to offer guidance and assistance. To this end, EFC members that make education loans should:

• Proactively make every reasonable effort within existing laws and regulations to contact private student loan borrowers who are behind on their payments to assist them with getting their loans out of delinquency. Strategies to help borrowers may include but are not limited to a short deferment or forbearance, a temporary reduced payment plan, and refinancing options. 
• Forgive the loan(s) for a student borrower who is the beneficiary of the loan proceeds who dies or becomes totally and permanently disabled after the full disbursement of the loan, and proactively inform borrowers and/or family members who are eligible for forgiveness. If the loan of a deceased or totally and permanently disabled student borrower has a cosigner, the cosigner should be released from the obligation and the loan forgiven.
• Adhere to their long-standing practice of not accelerating or placing a good-standing loan in auto default due to a cosigner’s death or bankruptcy filing.
• Whenever possible, work with individual borrowers who have defaulted on their loans, or who are experiencing long-term financial hardship, to modify their repayment plan to help the borrower return to, and stay on track with, their repayment and mitigate the negative consequences of default.
• In the event that collection activities are employed, charge only those collection fees that are reasonable in relation to the cost of collecting the debt.