Here’s what happens—and what to do—if you can’t pay your federal student loans (via CNBCMakeIt)
," says Yu, listing all of the different ways the federal government can collect on missed student loan payments. "The most common collection activity is that folks will have any tax refunds seized. When Social Security benefits or wages are garnished, they will typically take roughly 15% of those payments, but for the tax refunds, they actually will seize the entire amount."
"There's a significant amount of research that's been done to show that the Earned Income Tax Credit is the most effectivethat we have in this country," says Yu. "And so the impacts of taking this money actually are intergenerational." The Department of Education works with third-party collection agencies who will charge penalties and fees for not making a payment, sometimes as much asCollection agencies "harass folks with calls and texts, which can add to the mental stress of the debt," explains Harrington, noting that around this time the impact of default on a borrower's credit would be significant.
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