Student Loan Defaults: What's Coming for Borrowers

Millions of people are in trouble with their student loans. The Education Department has big plans starting next month. They will start sending defaulted loans to collections. This means roughly 5. 3 million borrowers could see their wages taken, tax refunds seized, or even parts of their Social Security checks grabbed to pay back loans. This hasn't happened in a while. The government stopped these collections back in March 2020. This was during the COVID-19 pandemic. They also paused federal student loan payments and interest. This break was extended a few times and ended in October. Now, things are changing. The government will start sending notices about these collection efforts soon. But there are ways out of default. Borrowers have options, and it's important to know them. First, let's talk about what happens when a loan goes into default. A loan becomes delinquent when a payment is missed by 90 days. If this continues for 270 days, the loan goes into default. This is serious. It can lead to wage garnishment and other big problems. So, what can borrowers do right now if their loan is in default? The Education Department suggests visiting their Default Resolution Group. There, borrowers can make a monthly payment, enroll in an income-driven repayment plan, or sign up for loan rehabilitation. Loan rehabilitation is a good option. It involves making nine on-time payments in a row. After that, the borrower is out of default. But this can only be done once. Another option is forbearance. This is a temporary pause on loan payments. It's for borrowers having financial trouble. To get forbearance, borrowers must contact their loan servicer. They can get forbearance for up to 12 months, but interest keeps adding up during this time. It's crucial for borrowers to stay informed and take action. Ignoring the problem won't make it go away. In fact, it could make things much worse. So, if you or someone you know is in this situation, don't wait. Look into these options and take control of the situation.