Apprehension and concern increase among student loan defaulters
Title: Tackling Student Loan Woes: A Guide for Borrowers at Risk
When the unexpected struck Davina Rush's family three years ago, leaving her son with a severe brain injury and her out of a job, she found herself unable to keep up with her $49,000 in student loan payments. Now, this 42-year-old Florida mom is among the millions of Americans who risk having their wages garnished due to student loan defaults.
"I'm really worried," she admitted. "If they took anything out of my pay, it would be a nightmare. We'd struggle to put food on the table."
The Education Department, in a move announced in April, plans to restart collections on federal student loans in default on May 5th, ending the pandemic-era pause that last half-decade. Amidst economic uncertainty caused by factors like increased inflation and trade tensions, borrowers like Rush are left scrambling to find a solution.
Betsy Mayotte, president of the Institute of Student Loan Advisors, emphasizes the potential impact of rising living costs on borrowers. "Things like groceries and housing are now more expensive. What was once affordable might no longer be," she said.
Education Secretary Linda McMahon, previously a staunch critic of the Biden administration's forbearance policies, maintains that the previous administration's practices further burdened taxpayers. In a Wall Street Journal op-ed, she claimed, "Debt doesn't disappear; it gets passed on to others if borrowers fail to pay."
For Leslie Gray, a therapist in Kansas City, Missouri, the pause on payments was a "lifesaver." She'd been juggling student loan payments alongside medical debt following her breast cancer journey in 2017. Now, she faces $185,000 in student debt and fears the May 5th deadline. Her solution? Selling her house, buying a small RV, and living in her parents' backyard.
Borrowers aren't entirely the government's enemy, according to experts. In situations of severe financial stress, it may be possible to discharge loans in bankruptcy—but only if certain criteria are met. Under the Biden administration, the process for demonstrating undue hardship became less burdensome, increasing the chances for loan discharge.
To avoid default, it's crucial for borrowers to act proactively, says Mayotte. "If you can't manage your loan payments now, you certainly won't be able to later if you delay."
Besides bankruptcy, there are other options for borrowers in distress. Income-driven repayment plans and loan rehabilitation offer routes to repayment, helping avoid wage garnishment and other harsh consequences. Communicating with your loan servicer is crucial to finding the best path forward.
The Education Department warns that up to 10 million borrowers could default in the coming months, including the more than 5 million currently in default and an additional 4 million delinquent borrowers. To avoid this, borrowers are encouraged to contact their student aid office's Default Resolution Group, enroll in an income-driven repayment plan, or consider loan rehabilitation.
Even with increased communication from the Education Department, some borrowers find it difficult to navigate their repayment options. Leslie Gray, for example, has yet to receive a response from the Education Department when asking about making a reasonable payment plan.
The revival of collections on defaulted federal student loans leaves many borrowers fearing the consequences—but it's essential to remember that action today can lead to a brighter, less stressful financial future. Consulting your student loan advisor, loan servicer, or a consumer bankruptcy attorney can help you make informed decisions and find the best path forward. Stay persistent, communicative, and patient in the fight to manage your student debt and secure a more stable financial future.
- With rising costs of living and the impending resumption of student loan collections, Davina Rush, a Florida mom, is worried about her ability to feed her family should her wages be garnished.
- Education Secretary Linda McMahon, while criticizing the Biden administration's forbearance policies, argues that unpaid student debt only burdens taxpayers more.
- Leslie Gray, a therapist in Kansas City, is considering selling her house and living in her parents' backyard due to the looming resumption of student loan collections and her fear of potentially defaulting on her $185,000 in debt.
- To avoid default on student loans and the harsh consequences that come with it, experts urge borrowers to communicate with their loan servicers, consider income-driven repayment plans, or enroll in loan rehabilitation, and to consult a student loan advisor, loan servicer, or a consumer bankruptcy attorney for guidance.
