Lately we’ve been on a Student Loan debt roll!
So much new information is coming out!
Let’s talk about when forbearance ends, who is most vulnerable to default once it does end, and what to do it you were already in default before the recent changes took place–there’s hope!
As we know, Student Loan forbearance was extended again recently for the seventh and final (!!) time.
Public Student Loan payments will be required again, starting Jan 1, 2023.
If you have been paying your student loans, good on you! You’re hacking away at your balance faster, since we’re in a temporary period where interest does not accrue.
If you haven’t been paying, that’s just fine, but set yourself up for success to be able to start paying again.
Here’s how you may be penalized if you were to end up in default once payments start up again:
Loans can be sent to collections.
Wages, tax returns and Social Security benefits may be garnished up to 15% for repayment.
You cannot escape this debt in bankruptcy. It will follow you!
Who is most likely to default?
Consumer Finance Protection Bureau (CFBP) Research shows that low-income and minority borrowers between the ages of 30-49 are likely to be the most financially vulnerable once the payments start up again.
“As of the most recent data, about 15 million borrowers have at least one of these risk factors and over 5 million have two or more:
Student loan delinquencies prior to the pandemic.
Payment assistance for student loans prior to the pandemic.
Multiple student loan servicers.
Delinquencies on other credit products during the pandemic.
Non-medical debts in collection during the pandemic.”
Already in default before the forbearance started in March 2020?
Some good news!
The latest forbearance extension included an important change for those borrowers who were in default (currently 7.5M borrowers) when the pandemic began: The government will allow delinquent borrowers to re-enter repayment in good standing. Additionally, collections has already been suspended.
As part of the “Fresh Start” initiative, borrowers in default will be allowed to return to good standing without a past-due balance.
Eligibility depends on loan type and default date.
Private Loans are not included.
Once the program launces, borrowers will have to choose a new payment plan at MyEdDebt.Ed.Gov
After the forbearance ends 12/31/22, borrowers will have a ONE YEAR window to sign up.
If you default after forbearance ends, you’ll miss out on any of the new opportunities.
Get organized! Find out who your loan providers are and how much you owe.
If you are eligible, keep an eye out for new information!
You can also call the Education Department’s Default Resolution Group at 800-621-3115.
Unlocking Abundance 