The initial date for resuming the collection of overdue student loans is Monday, May 5, 2024. It would seem that after the halt of collections over four years ago amid the coronavirus pandemic, they are going to be reinstated. Millions of Americans who have had student loans and who have not made a payment in years will now start receiving emails and Notices informing the borrower that collection activities are now underway.
The government says it’s about protecting taxpayers
Just last month, the Department of Education argued that it was so important to end the pause so as to protect U.S. taxpayers. “American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” Education Secretary Linda McMahon said. She blamed the Biden administration for giving false hope to borrowers about loan forgiveness, stating, “The executive branch does not have the constitutional authority to wipe debt away.”
Nearly a third are behind on payments
According to the Department of Education data, over 42 million Americans are currently carrying a student debt of over $1.6 trillion. Over 5 million are in default, having not made a payment in over a year. Another 4 million are considered in severe delinquency, late by more than three months. This means that collections will soon have almost 10 million people to track.
Borrowers will start getting notices
The Department said that it will first contact borrowers through email, asking them to take action. Borrowers are encouraged to:
- Make a monthly payment
- Sign up for an income-driven repayment (IDR) plan
- Join a loan rehabilitation program to fix your credit
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If no action is taken, the Department will begin more serious measures later this summer, including wage garnishment — meaning money can be taken from your paycheck directly.
Pandemic pause officially over
Payments were suspended in March 2020 due to the COVID-19 pandemic. While in October 2023, payments resumed in name, the Biden administration still allowed a temporary grace period before collections would recommence. Still, critics contend that all this only confused borrowers and delayed the inevitable.
“While Congress required payments to resume last October, the Biden-Harris administration refused to restart collections,” the Department said in a statement. “They misled borrowers with loan forgiveness plans and temporary programs that didn’t fix the bigger problems.”
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The default penalties and consequences are gory
While borrowers ignore their loans, they can go through a whole gamut of consequences. The government can withhold some federal benefits, such as tax refunds or Social Security checks. These penalties are instituted to coerce borrowers into making arrangements to pay back their loans.
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Next steps for borrowers
If you are in default, get in touch with the Default Resolution Group to learn what all could be options for you. An income-driven repayment plan or loan rehabilitation might be what stops collections and puts things back on track for you. Do not hesitate; the sooner you act, the better you will protect your paycheck and future.
