Student loan borrowers face a new reality as the Biden administration transitions to the Trump administration. Key updates, including the resumption of defaulted loan collections through wage garnishments, are outlined.
As the White House transitions from President Joe Biden's administration to President-elect Donald Trump's, a few key updates will impact borrowers. The closure of the Education Department's on-ramp program means servicers are able to resume collecting on defaulted loans through wage garnishments. This program formally expired in October, but the Biden administration gave borrowers an extra few months before allowing these collection activities to resume.
Ideally, you can make your student loan payment in full and on time each month. But if you do miss a payment or can't pay, you'll want to reach out to your servicer as soon as possible to see what options you have to avoid the harshest consequences. Loans are delinquent the day after a missed payment, and after 90 days your servicer will report the delinquency to the credit reporting agencies. After 270 days of nonpayment, your loan will be considered defaulted. At that point, the entire balance comes due immediately and you could be subject to wage garnishments or the seizure of your tax refund or other federal benefits. Borrowers hoping for a last-minute act from Biden to forgive debt may have been disappointed to learn that wasn't happening. While the Biden team had been working to allow the Secretary of Education to discharge loans for long-term borrowers and those facing a variety of financial hardships, those efforts did not come to fruition before the transition. However, existing loan forgiveness programs, such as Public Service Loan Forgiveness and Teacher Loan Forgiveness, remain available to borrowers. However, very few borrowers had their loans discharged under these programs during the first Trump administration, due to both technical problems and a complex application process. The Biden administration had been working to improve these programs, like expanding the criteria for qualifying payments to better streamline the application and approval process for PSLF, but it remains to be seen whether borrowers who become eligible to have their loans forgiven will see their debt discharged under President Trump
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