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How will the resumption of student loan collections affect borrowers?
The resumption of student loan collections will significantly impact approximately 5.3 million borrowers who have defaulted on their federal loans. Starting May 5, 2025, borrowers may face wage garnishments and withheld tax refunds if they do not resume payments. This change follows a pause that began in March 2020, and many borrowers are now bracing for the financial repercussions.
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What options do borrowers have to manage their loans?
Borrowers have several options to manage their loans effectively. They can contact the Default Resolution Group to explore rehabilitation programs or repayment plans that may help them avoid default. Additionally, borrowers can consider income-driven repayment plans that adjust monthly payments based on their income, making it easier to stay on track.
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What are the consequences of defaulting on federal student loans?
Defaulting on federal student loans can lead to severe consequences, including wage garnishments, tax refund seizures, and damage to credit scores. Borrowers may also lose eligibility for federal student aid and face legal action from loan servicers. It’s crucial for borrowers to take proactive steps to avoid default and seek assistance if they are struggling to make payments.
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What should borrowers do if they can't afford their payments?
If borrowers find themselves unable to afford their student loan payments, they should reach out to their loan servicer immediately. Options such as deferment, forbearance, or income-driven repayment plans can provide temporary relief. It’s essential to communicate with the loan servicer to explore available options and avoid falling into default.
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How can borrowers prepare for the resumption of payments?
To prepare for the resumption of student loan payments, borrowers should review their loan details, update their contact information with their loan servicer, and create a budget that includes their monthly payment. Additionally, borrowers should consider setting up automatic payments to ensure they stay on track and avoid late fees.
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Where can borrowers find more information about their loans?
Borrowers can find more information about their loans by visiting the Federal Student Aid website, which provides resources on repayment options, loan forgiveness programs, and contact information for loan servicers. Additionally, borrowers can reach out to financial advisors or nonprofit credit counseling services for personalized assistance.