The Department of Education will start collecting next month on student loans that are in default for borrowers.
When will collection on student loans begin?
Why you should care:
On May 5, the Education Department will begin involuntary collection through the Treasury Department’s offset program which withholds government payments like tax refunds and federal salaries.
The Associated Press reported that after a 30-day notice, the Department of Education will also begin garnishing wages for borrowers in default.
RELATED: Did you default on your student loans? What to know as collections resume
How is a default on a student loan defined?
Dig deeper:
Student loan borrowers who don’t make payments for nine months go into default, which is reported on their credit scores and can go to collections, the Associated Press.
Along with the borrowers who are currently in default, another 4 million are 91 to 180 days late on their loan payments. Less than 40% of all borrowers are up to date on their student loans, Education Department officials told the AP.
What are my options if my student loans are in default?
Local perspective:
Student loan borrowers in default can avoid wage garnishment by getting into loan rehabilitation, Betsy Mayotte, president of The Institute for Student Loan Advisors, shared with the AP.
To get into this type of program, borrowers have to contact their loan service provider for more information on how to enroll. According to the AP, servicers ask for proof of income and expenses to calculate a payment amount.
If a student loan borrower has paid on time for nine months consecutively, they are taken out of default, Mayotte told the AP. But a loan rehabilitation can only be performed once.
Biden-era student loan forgiveness programs
The backstory:
Student loan borrowers in then-President Joe Biden’s SAVE Plan were placed in forbearance, meaning borrowers receive relief from payments but still accrue interest. In February, the Department of Education took down applications for income-driven repayment programs — which tie a monthly payment to a person’s income level — only to bring them back online a month later.
The Source: Information for this story was provided by the Associated Press and previous LIVENOW from FOX reporting. This story was reported from Washington, D.C.
