This year, the U.S. Department of Education will resume collection activities for federal student loan borrowers who have defaulted on their loans, including garnishing wages and retirement benefits. A memo from the Department outlines the Biden administration’s efforts to help borrowers stay current on their payments as collection efforts resume, following a pause on repayments due to the pandemic. The Department is working to make it easier for borrowers to enroll in affordable repayment plans, such as income-driven repayment plans that base monthly payments on discretionary income and family size.
Borrowers in default may face consequences starting in October, including wage garnishments and Social Security benefit offsets as early as August. However, the Department is exploring options to reduce the burden on borrowers, such as increasing interest rate incentives for automatic payments and allowing borrowers to enroll in income-driven repayment plans even while in default. The Biden administration has also eliminated most collection fees on federal student loans and increased the amount of Social Security benefits that can be protected from offsets.
Overall, these actions are intended to reduce the impact of defaults on federal student loan borrowers and provide pathways to forgiveness for those in default. Borrowers will have more opportunities to enroll in repayment plans and avoid the consequences of defaulting on their loans. The Department’s efforts aim to support borrowers as they navigate the challenges of repaying their student loan debt while also managing their financial responsibilities.
Photo credit
www.nbcnews.com