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What happens when student loan collections restart?
When student loan collections restart, borrowers who are in default may face aggressive collection actions. This includes wage garnishments, where a portion of their paycheck is withheld to pay off the debt, and the potential for tax refunds to be seized. Approximately 5.3 million borrowers will be affected by this change, marking a significant shift from the previous pause on collections.
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How can borrowers prepare for wage garnishments?
To prepare for potential wage garnishments, borrowers should first assess their financial situation and budget accordingly. It's advisable to contact the loan servicer to discuss repayment options or to set up a payment plan. Additionally, borrowers can explore options for rehabilitation or consolidation of their loans to avoid default and the associated consequences.
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What options do borrowers have if they can't pay?
If borrowers find themselves unable to make payments, they have several options. They can apply for income-driven repayment plans, which adjust monthly payments based on income. Additionally, borrowers may consider deferment or forbearance, which temporarily pauses payments. It's crucial to communicate with the loan servicer to explore these options and avoid default.
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What are the implications of the end of the payment pause?
The end of the payment pause means that borrowers will need to resume making payments on their student loans, which can significantly impact their monthly budgets. Many borrowers may struggle to adjust after years of not having to make payments. This situation has raised concerns among advocates who argue that the sudden resumption of collections is harsh, especially for those still recovering from the financial impacts of the pandemic.
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What should borrowers do if they are in default?
Borrowers in default should take immediate action to address their situation. They can contact their loan servicer to discuss options for getting out of default, such as loan rehabilitation or consolidation. It's also important to stay informed about their rights and the potential consequences of default, including wage garnishments and tax refund seizures.
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How can borrowers stay informed about changes in student loan policies?
To stay informed about changes in student loan policies, borrowers should regularly check the U.S. Department of Education's website and subscribe to updates from their loan servicer. Following reputable news sources and advocacy organizations can also provide valuable insights into the evolving landscape of student loans and any new relief measures that may be introduced.