The Education Department will begin collection next month on student loans that are in default, including the garnishing of wages.
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FILE - New graduates line up before the start of a community college commencement in East Rutherford, N.J., May 17, 2018. This summer, millions of Americans with student loans will be able to apply for a new repayment plan that offers some of the most lenient terms ever. Interest wonât pile up as long as borrowers make regular payments. Millions of people will have payments of $0. And starting in 2024, undergraduate loan payments will be reduced by half. The Education Department will begin collection next month on student loans that are in default, including the garnishing of wages for potentially millions of borrowers, officials said Monday.The Trump administration ’s announcement marks an end to a period of leniency that began during the COVID-19 pandemic. No federal student loans have been referred for collection since March 2020, including those in default. Under President Joe Biden, the Education Department tried multiple times to forgive millions of people’s student loans, only to be stopped by courts. “American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” Education Secretary Linda McMahon said. Beginning May 5, the department will begin involuntary collection through the Treasury Department's offset program, which withholds payments from the government — including tax refunds, federal salaries and other benefits — from people with past-due debts to the government. After a 30-day notice, the department will also begin garnishing wages for borrowers in default.“This is cruel, unnecessary and will further fan the flames of economic chaos for working families across this country,” said Mike Pierce, executive director of the Student Borrower Protection Center.In 2020, President Donald Trump paused federal student loan payments and interest accrual as a temporary relief measure for student borrowers. The pause in payments was extended multiple times by the Biden administration through 2023, and a final grace period for loan repayments ended in October 2024. That meant tens of millions of Americans had to start making payments again. Borrowers who don't make payments for nine months go into default, which is reported on their credit scores and can go to collections. In addition to the borrowers already in default, around another 4 million are between 91 to 180 days late on their loan payments. Less than 40% of all borrowers are current on their student loans, department officials said. For borrowers in default, one step to avoid wage garnishment is to get into loan rehabilitation, said Betsy Mayotte, president of The Institute for Student Loan Advisors. Borrowers need to ask their loan servicer to be placed into a loan rehabilitation program. Typically, servicers ask for proof of income and expenses to calculate a payment amount. Once a borrower has paid on time for nine months in a row, they are taken out of default, Mayotte said. A loan rehabilitation can only be done once. Biden oversaw the cancellation of student loans for more than 5 million borrowers. Despite the Supreme Court's rejection of his signature proposal for broad relief, he waived more than $183.6 billion in student loans through expanded forgiveness programs.“Going forward, the Department of Education, in conjunction with the Department of Treasury, will shepherd the student loan program responsibly and according to the law, which means helping borrowers return to repayment — both for the sake of their own financial health and our nation’s economic outlook,” she said.
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Student loans in default to be referred to debt collection, Education Department saysThe Education Department will begin collection next month on student loans that are in default, including the garnishing of wages for potentially millions of borrowers, officials said Monday.
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Student loans in default to be referred to debt collection, Education Department saysWASHINGTON (AP) — The Education Department will begin collection next month on student loans that are in default, including the garnishing of wages for
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Student loans in default to be referred to debt collection, Education Department saysThe Education Department will begin collection next month on student loans that are in default, including the garnishing of wages for potentially millions of bo
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Student loans in default will be referred to debt collection, Education Department saysThe Trump administration’s announcement marks an end to a period of leniency that began during the COVID-19 pandemic. Roughly 5.3 million borrowers are in default on their federal student loans.
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