6 Hazards Every Student Loan Borrower Should Beware Of

Student loans help millions of Americans who would otherwise be unable to afford college to get an education. But after they leave school, ever growing numbers of them are finding excessive college debt to be a major financial problem. Some people believe the $1.2 trillion that graduates and their parents now owe on student loans has become a national financial crisis: An estimated 40 million Americans now owe some form of student-loan debt, according to credit-reporting bureau Experian (EXPN).

Most student loan borrowers want to pay off their obligations. But as a recent report from the Consumer Financial Protection Bureau found, borrowers often have trouble getting the help they need from lenders to avoid default and stay on track to pay down their loans. The federal agency received 5,300 complaints about student loans over the past year, which was 38 percent more than it got during the previous year, and it noted six common themes among the complaints and misunderstandings.

1. Don't Expect Clear Guidance from Lenders on Avoiding Default

Many lenders have policies that can help you if you find yourself unable to make timely payments. But the bureau reported that it's hard to get clear information about those policies, as you often won't find them on lenders' websites. Moreover, those who filed complaints noted that different customer service representatives would give them different information about eligibility.

2. Many Lenders Unable or Unwilling to Help

The bureau found that most borrowers want to avoid the consequences of not meeting the terms of their loans. But even when they proactively sought relief in advance, many borrowers found that their lenders were unable or unwilling to help, rather than constructively working with individuals to find alternative repayment solutions that fit with the current financial predicaments they faced. Lenders' refusal to offer such assistance eventually forced borrowers to go down the path toward delinquent payments and loan default.

3. Even When Lenders Help, It Can Be Minimal

Some lenders are helpful in providing ways to help borrowers. But those solutions are often too short to address underlying financial issues. For instance, many lenders use short-term forbearance, which gives lenders a three-month window to not make payments. But for those who've been unable to find a job for years, three months is too short to do much good, and in most cases, lenders won't allow such options multiple times.

4. You Might Have to Default to Get Lenders' Attention

Perhaps the most egregious thing that some lenders do to student loan borrowers is to withhold possible solutions until borrowers have no choice but to stop paying in a timely fashion. In some cases, lenders say that borrowers' best solution is to allow a loan to go to a collection agency and then try to work out a separate arrangement that allows for partial repayment. In other cases, though, lenders themselves came out with reduced-payment solutions that would have solved borrowers' problems entirely -- if only they'd been available before the borrower had defaulted.

5. Expect Delays, Fees and Other Hassles

The process of getting loan forbearance or modification can be long and complicated, and many borrowers told the bureau they were frustrated with preparing paperwork only to find out later that they weren't eligible for help. In addition, some lenders charged fees simply to consider applications for lower payments. When borrowers can't afford to make payments, they clearly can't afford fees that can amount to $50 or more per loan, and the red tape associated with the process often leads to default before the needed help can arrive.

6. If You Can't Graduate in 4 Years, You Not Be Able to Afford It

Most lenders allow borrowers to get loan deferments and therefore not have to make payments on their loans while they're still in school. But often, there's a limit of between four years and five-and-a-half years on those programs. What that means is that many students who follow nontraditional paths for their college education, such as taking reduced course loads and working half-time to finance their tuition and other expenses, find themselves having to repay loans even before they graduate. Others have to start repaying loans in graduate school. In both cases, the burden can sometimes force borrowers to stop going to college to make enough money to make their payments.

Motley Fool contributorDan Caplingernever met a student loan he really liked. You can follow him on Twitter@DanCaplingeror onGoogle Plus. To read about our favorite high-yielding dividend stocks for any investor, check outour free report.