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What does the resumption of student loan collections mean for borrowers?
The resumption of student loan collections means that approximately 5.3 million borrowers will need to start making payments on their defaulted federal student loans. If payments are not made, borrowers may face wage garnishments and the withholding of tax refunds. This marks a significant shift from the previous pause on collections that began in March 2020.
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How can borrowers prepare for the upcoming changes?
Borrowers can prepare for the resumption of collections by reviewing their loan status and understanding their repayment options. It's advisable to contact loan servicers to discuss potential repayment plans or deferment options. Additionally, borrowers should budget for upcoming payments to avoid default.
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What are the consequences of defaulting on student loans?
Defaulting on student loans can lead to severe consequences, including wage garnishments, withheld tax refunds, and a significant drop in credit scores. Borrowers may also face legal action from lenders, making it crucial to stay informed and proactive about repayment.
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What options do borrowers have if they can't afford payments?
If borrowers are struggling to afford their payments, they can explore options such as income-driven repayment plans, deferment, or forbearance. These options can provide temporary relief and help borrowers avoid default while they work on improving their financial situation.
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How will the Biden administration's repayment program affect borrowers?
The Biden administration's repayment program, known as SAVE, has been frozen, leaving many borrowers uncertain about their repayment options. While the program aims to provide relief, its current status means borrowers should stay informed about any updates and consider alternative repayment strategies in the meantime.
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What should borrowers do if they are already in default?
Borrowers who are already in default should take immediate action to address their loans. This may include contacting their loan servicer to discuss rehabilitation options or repayment plans. It's essential to act quickly to avoid further penalties and to regain good standing.