Now that the Trump administration, Americans with paid student loans may face payments and other serious financial consequences Restart the collection Earlier this month.
Since March 2020 Coronavirus disease The pandemic has damaged the U.S. economy, causing unemployment to soar. According to the Ministry of Education, nearly 43 million borrowers have a total student debt of more than $1.6 trillion.
In this figure, more than 5 million loan defaults mean they have no monthly payments for more than 360 days, the agency said. The additional 4 million borrowers are in late-stage crimes and have not paid for at least 91 days. The Department of Energy expects that within a few months, their loans may default on 10 million or 25% of student borrowers.
Older Americans are in a worse condition when it comes to paying student debts than younger borrowers. Although Oxford Economics notes that while young borrowers are in relatively better shape, Americans over 50 make up 33% of crimes while they make up 50-plus loans.
Student loans are different from other types of consumer debt because there are no indefinite penalties for the government’s default loans, which means the government can take punitive actions indefinitely, Persis Yu is the deputy executive director and executive consultant of the Center for Student Borrower Protection.
"This is much worse than any other financial product," Yu told CBS MoneyWatch. "It's a very small thing, with these severe penalties."
And, due to the five-year suspension of collections due to the pandemic, some student loan borrowers may have forgotten the serious financial consequences of the default. "This leaves a collective consciousness," she said.
This is about the potential impact of defaulting student debt, including the possibility of when wages can be deducted.
The Trump administration announced on April 21 that the Federal Student Aid Office (FSA) will resume collections of defaulted federal student loans starting May 5. At the time, the U.S. Department of Energy would send notifications to default borrowers in the next two weeks to make “they are aware of these developments.”
FSA's notification of borrowers Salary can be decorated The doe said it will come “later this summer.”
Under the law, lenders can get their borrower’s salary without going to court, as long as it gives them at least 60 days notice by email before starting the collection action.
"All they have to do is send a notice to the borrower that they are going to take your money and you have a 60-day response," Yu said.
According to experts, given the resumption of collections about student loans earlier this month, people can start seeing their wages in the fall.
Government notices inform people how to start paying, register for income-driven repayment programs or sign up for loan rehabilitation to avoid seizing a portion of their salary. However, it will not instruct the borrower how to stop pay garnishment.
"Notices issued by the Trump administration will not create a defense, nor do they list the right to appeal wage appeals based on financial difficulties, which is really important for borrowers," Yu said.
A lender can decorate up to 15% of your one-time salary, but must make the borrower's minimum hourly wage equivalent to 30 times, or $7.25, or $217.50 per week. This applies even if the borrower lives in a state with a minimum wage above the federal level.
Yes. In addition to wages, the federal government can deduct tax refunds and Social Security retirement and disability benefits when defaulting loans.
Nancy Nierman, assistant director of the New York Education Debt Consumer Assistance Program, told CBS MoneyWatch that you are protected if you have submitted your taxes and received a refund. "But if you ask for an extension period, you'll notice it," she explained.
The government or lender may have to send the borrower to court to target other assets.
"It will require a judgment and some kind of court intervention, which is relatively rare," Neilman said.
In some cases, student loan borrowers have the right to challenge their default status. First, the debt may not be theirs. Second, they may not owe the amount of debt claimed by the government. Third, they can claim that wage garnishment will cause their financial difficulties.
"There are reasonable reasons why they can block salary deductions," Yu said. "But I'm very worried that the notifications don't tell people the full scope of the relief."
Borrowers can also obtain the latest loan through other methods. For example, consider requiring a loan to recover from a default of nine on time payments over a 10-month period.
You can also avoid entering a default and earning your salary through a loan consolidation. Essentially, this process replaces your old debt with a good reputation and you can start paying. If you can repay your loan in full, that's another way to exit the default.