If your student loan has been setting unpaid with no consequence, all that is changing, starting May 5th!
5.3 million student loans are currently in default. Ever since the Covid pandemic, grace has been extended for unpaid loan, but that is changing now.
Many borarowers have been hoping and expecting their loans to be “forgiven”; that is, for the federal government to say, “That’s okay, you don’t have to pay it back. We understand finances are difficult. We are cancellng your loan.”
But the courts ruled that the federal government does not have the authority to cancel student loans, nor did any U.S. President have that authority.
Now the U.S. Treasury Dept. has announced that borrowers will be given one 30-day notice, and if they (you) don’t pay, the Dept. will begin garnishes wages of borrowers in default.
Garnishing wages means they can withdraw money straight out of your paycheck — each and every month until the bill is paid.
Is this fair? The Dept. thinks so. They say it is unfair to make citizens who did not take a loan foot the bill for loans of the citizens who did.
Please take this warning seriously. Please pass it on to people you know who have a student loan and have assumed it was going to be forgiven so there would be no reason to pay.
Again, this starts May 5, so it is just a couple weeks away. Get your finances set up and start paying on your student loan voluntarily before your credit and paycheck gets hit.
Available in paperback and on Kindle here.
If your credit scores have already been hit. What is the next step or what can I do next?
I would start by contacting the student loan servicing department and working out a payment plan. I would get it in writing, and ask that the Agreement include a clause that says when your loan is paid in full, that the collection-default status (I don’t know how it looks on your credit report) be deleted. I would ask them to include the on-time payments to show as “paid as agreed” on your credit report. Then you want to make all payments on time. And don’t trust auto-pay, because the student loan servicers are infamous for messing up auto-pay.
At the same time, you need to look at all accounts on your credit report. Build and Protect Your Credit Like the Pros is a good guide to establishing positive credit.
I wish you all the best!