Student Loan Collections Are Coming Back: What You Need to Know
Student Loan Collections Are Coming Back: What You Need to Know | Money Monday
Big changes are on the way for millions of Americans with student loans. Starting May 5, the Department of Education will begin collecting on defaulted loans again — but according to financial expert Janai Thornton, it’s not affecting everyone.
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Speaking with Get Up Mornings with Erica Campbell, Janai explained that about 5.3 million borrowers will be impacted, specifically those who went into default before the pandemic began. Default means someone hasn’t made a payment in about nine months, so this group has been behind for quite some time — it doesn’t include people who are just recently struggling.
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If you’re wondering whether you’re on that list, Janai had some simple advice: check your mail and email for notices from the Department of Education. But the safest way to find out? Visit studentaid.gov and review your loan status yourself.
She also helped clear up some confusion around loan servicers. Even though your loan is backed by the government, a loan servicer is the company that actually handles the billing and communication for your loan. “It’s really important to know who your servicer is because that’s another way to stay in contact, especially since the Department of Education is laying off a lot of people,” Janai said. Some major servicers include EdFinancial, MOHELA, and the Default Resolution Group.
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Another hot topic is wage garnishment. Janai explained that if your loan is in default and nothing is done, the government could eventually take up to 15% of your net paycheck. But don’t panic — she stressed that it won’t happen without warning. You’ll be notified before any deductions start, and so will your employer. Besides your paycheck, the government also has the right to seize your full tax refund and even take money from Social Security benefits if you’re in default.
Related Article: Education Department To Garnish Wages On Student Loan Debt
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The bottom line? Be proactive. It’s possible to get out of default and avoid garnishment altogether. Janai emphasized that borrowers need to stay alert, update their contact information with their servicer, and start making plans now.
For more information about your student loans, head to studentaid.gov, and be sure to follow Janai Thornton on all social media platforms. You can also check out her Thank Me Later podcast for more financial tips.
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