FRESNO, Calif. (KFSN) — A break for borrowers as the White House pushed pause on plans to garnish the wages of federal loan recipients in default.
The Department of Education has decided they need a little bit more time to resolve issues with the student loan system, and once they do that, wage garnishments will begin,” says Jennifer Finetti with ScholarshipOwl.
Millions of borrowers are considered in default, meaning they are at least 270 days past due on their payments.
“Out of your net paycheck, you can potentially lose up to 15 percent more of that net amount to go toward those wage garnishments,” Finetti said.
Finetti says while it’s unclear when collection on defaulted debt will resume, there are still steps borrowers can take to get their accounts in good standing.
“Contact your loan servicer and find the status of your loans,” she said.
Repayment options are likely available to get back on track.
“Go through the rehabilitation process, making nine on-time payments for nine months in a row on your student loan,” Finetti said. “The amount of your payment would be something you work out with your loan servicer.”
Finetti says a faster process could be to bring your debt together and tackle it as one lump sum.
‘You would be able to agree to a new payment with a consolidated loan and then be required to make three on-time payments in a loan,” she said.
Various options come with pros and cons, so it’s important to do your homework to determine which avenue is best for you.
“This is not a time to do nothing,” Finetti said. “This is almost a gift. Now, there’s a bit of time to figure out how to get your finances in order and get yourself into a better place.”
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