Press Release: Student Loan Collections Resume – What Borrowers Need to Know
Starting May 5, the Trump administration is reinstating federal student loan collections after a five-year hiatus, impacting over five million borrowers. The Education Department emphasized this decision is necessary to protect taxpayers from the financial burdens of unpaid loans, which borrowers willingly took on. Borrowers in default face immediate and severe repercussions, including the potential for government withholding of tax refunds, Social Security checks, and wage garnishments, along with damaging impacts on credit scores.
Borrowers who have fallen behind or are delinquent on their student loans should take action quickly, as there is no statute of limitations on federal student loan debt. Michele Zampini of TICAS warns that the government can pursue collections indefinitely. Default occurs after 270 days of missed payments, and those currently delinquent may soon find themselves in default if they don’t act.
Experts recommend that affected individuals log into their studentaid.gov accounts for updates. For those in default, the Education Department is required to send a 60-day notice before escalating collections to the Treasury Offset Program.
Borrowers can navigate their way back to good standing through two main options: loan rehabilitation, which involves making nine on-time payments, and loan consolidation, allowing multiple loans to be combined into one. Both processes can restore access to standard repayment options, with rehabilitation removing the default mark from credit reports, whereas consolidation retains it for seven years.
Navigating default can be complex, and experts urge borrowers to educate themselves about their options. Community resources and nonprofits, like TISLA, are available to assist. Importantly, borrowers should avoid scams promising quick fixes for a fee.
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