Rising student debt underscores need for more effective loan management

Student loan management software can help lenders establish workable repayment schedules.

If you've looked at the news lately, you're probably aware of the growing problem with student loans — they aren't being paid back. The total amount of outstanding student loan debt has nearly doubled since 2007 and now exceeds $1.1 trillion.

The situation has become so severe that the government has started multiple programs that allow borrowers to make payments based on their income after graduation. Payments are made for up to 25 years, after which the remaining balance is forgiven.

However, these programs have been much more costly to operate than anticipated. According to the Wall Street Journal, the amount of debt absorbed by the repayment plans from the Stafford loan program exceeded the government's projections by about 90 percent during the last fiscal year. Ultimately, the most popular plan, Pay As You Earn, could cost as much as $14 billion per year in the future.

There are also concerns that these programs could encourage reckless borrowing and cause further inflation of the cost of higher education. A recent report from the Brookings Institution noted that the prospect of not having to repay loans in full "creates incentives for students to borrow too much to attend college, potentially contributing to rising college prices for everyone."

In recognition of these issues, lawmakers from both parties have expressed support for limitations on debt forgiveness programs. President Obama's latest budget plan called for a $57,500-per-student cap on debt eligible for forgiveness.

Lenders can do their part to help improve the current situation by implementing student loan management software that allows them to track important student information, establish workable payment schedules and exercise full control over how each payment is applied.