Federal student loans in default will be sent to collections next week. Here's what to know
The Trump administration will end the last piece of pandemic-era student loan relief and send defaulted student loans to collections starting May 5.
This comes after President Donald Trump paused student loan repayment due to the COVID-19 pandemic in March 2020. President Joe Biden went on to extend this relief, and student loan repayments didn't resume until October 2023. Even then, borrowers still weren't penalized for late payments until last fall.
Now, the estimated 5 million people with federal student loans in default could see their wages garnished and their federal payments reduced as their loans are sent to collections.
Here's what you need to know about your defaulted student loans:
How do I know if my loans are in default?
Defaulted student loans begin with delinquency, which happens when you miss a payment. After 90 days, this is reported to national credit bureaus, impacting your credit score.
Your loans will go into default if you haven't made a payment in 270 days and haven't made an agreement with your borrower, such as deferment or forbearance.
You can log into your federal student loan account to check the status of your loans.
I have loans in default. What happens now?
The Education Department will begin forced recollections on May 5.
That means the agency can garnish portions of your wages to pay the loans without a court order. Your credit score could also suffer, impacting your ability to obtain new loans or rent an apartment.
Officials could also withhold any tax refunds or other federal payments to put towards your loan payment. This could also mean withholding up to 15 percent of your monthly Social Security retirement and disability benefits.
If your loans are in default, the Federal Student Aid office will reach out in the coming weeks with information about the Default Resolution Group. The office can help you navigate your defaulted student loans.
How do I get out of default?
One option is to pay your loans off in full right away — but that isn't feasible for most of the 5 million people in default.
The two main options are rehabilitating your loans and consolidating your loans, according to the Federal Student Aid office.
Rehabilitating your loan means that you agree in writing to make nine reasonable monthly payments, which are determined by the loan holder, within 20 days of the due date. You must also make all nine payments over 10 consecutive months.
Depending on your income, your monthly payment under a rehabilitation plan could be as low as $5.
Consolidating your loan allows you to pay off one or multiple federal student loans with a new consolidation loan. To consolidate, you can agree to repay the new loan under an income-driven repayment plan. Alternatively, you can make three consecutive, voluntary, on-time and full monthly payments on the defaulted loan before you consolidate it.
You can learn more about reconciliation and consolidation from the Federal Student Aid office.
What is loan deferment?
Your loan may be eligible for deferment, which means you don't have to make payments. This also means you aren't making any progress toward repaying your loan.
If you're enrolled in college or a career school at least half-time, your loans are automatically in deferment.
However, there are various other reasons for deferment, including cancer treatment, economic hardship, graduate fellowship completion, military service, and unemployment.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Leader Live
32 minutes ago
- Leader Live
‘Sluggish' UK business activity picks up as tariff threat eases
The strengthening service industry helped offset a persistent slump in manufacturing in June. The S&P Global flash UK composite purchasing managers' index (PMI) reported a reading of 50.7 in June, up from 50.3 in May. The flash figures are based on preliminary data. Any score above 50.0 indicates that activity is growing while any score below means it is contracting. The volume of new business returned to growth in June, ending a six-month period of contraction, the survey found. This was primarily driven by the service sector – the largest part of the UK's economy, spanning industries including hospitality, entertainment and culture, finance and real estate. A further slight expansion of activity in the sector was contrasted by another drop in production for manufacturers, led by a decline in overseas export orders. Concerns over the impact of Donald Trump's tariffs on US imports were partly behind the slump, despite some businesses saying confidence had improved as a result of the President striking new trade deals with countries including the UK. Chris Williamson, chief business economist at S&P Global Market Intelligence, said the UK economy was in a 'sluggish state' in recent weeks. 'Although business conditions have continued to improve since April's downturn, quelling recession fears, growth of business activity remains disappointingly lacklustre, indicative of second quarter GDP (gross domestic product) rising at only a 0.1% quarterly pace,' he said. 'Business confidence also remains in the doldrums compared to this time last year, losing ground again in June. 'On top of concerns over the impact of recent government policies and worries over global trade protectionism, June's data collection coincided with increased tensions in the Middle East. 'Employment has hence continued to be cut as firms grapple with the combination of higher staffing costs, linked to last autumn's budget, lower demand and subdued confidence.' The survey showed that hiring continued to be squeezed throughout the month, with employment across the private sector decreasing for the ninth month in a row and at a faster pace than May. Businesses surveyed said they had been making cutbacks to their workforce through hiring freezes and redundancies. But Elliott Jordan-Doak, senior UK economist for Pantheon Macroeconomics, pointed out that 'businesses were more optimistic about the future in June than in May, suggesting the economic outlook is improving'. 'Domestic activity is proving more resilient than external demand, consistent with Mr Trump's tariff threats weighing on cross-border trade,' he added. 'All told, the PMI suggests that business confidence is staging a fragile recovery after being battered by tariff threats and tax increases. 'That said, rising geopolitical stress is likely to be added to the growing list of worries facing businesses.'
Daily Mirror
32 minutes ago
- Daily Mirror
'Trump let Iran make nukes he's mad about - he's at war for a Nobel Peace Prize'
If there is one disease which lies behind the constant spasms of horror with which our days our currently blighted, it is the human race's inability to remember what happened five minutes ago. Once upon a time, journalists would go to the pub, and then bed. Sometimes they'd go to bed with each other, because they'd been to the pub. But they'd wake up in the morning and go "blimey, an earthquake in Japan. I had better find a good story of my own about this". And they would have to go deeper into a story and its origins. Today they don't drink, barely know their colleagues, and wake up to emails from a 24-rolling news ecosystem that demands constant feeding. Journalists think "blimey, everyone else is ahead of me" and scramble to catch up. No-one has time to think, which is why no-one has told you that Donald Trump just bombed Iran for making nuclear weapons that Donald Trump let them make. I wish I was making this stuff up, but no-one's got time for that. It's imperative people start remembering how we got to the cliff edge, because we did it by skipping about blindfold and if we don't stop soon we're going to go right over. America gave Iran nuclear technology in 1957. The aim was 'atoms for peace', to create wealth, and allies in the Middle East. After years of the world's greatest democracy propping up a cruel monarchy, the shah fell, the mullahs arose, and Iran was in less-friendly hands. The 1980s was taken up with a war against Iraq, but in the 1990s two Gulf Wars and continued US tinkering led the mullahs to the not-entirely-mad opinion that a nuclear weapon was the best way of keeping the Great Satan at bay. Israel, quite reasonably, was less than chuffed. And as technology sped up it became imperative to find ways of stopping Iran getting a weapon that apocalyptic fundamentalists would see very little reason not to detonate, slap-bang in the middle of a resource-rich, conflict-heavy trade route. And so in 2015, six countries signed a deal with Iran. In return for checks that it wasn't building The Bomb, everyone was open for business. And for three years the Joint Comprehensive Plan of Action worked. Germany, China, Russia, France, the UK, China and the US lifted economic sanctions, and every 90 days would ratify everything was non-nuclear and tickety-boo. But such a vague agreement could not withstand the arrival of Donald Trump, whose tiny hands happily dismantled everything that made Barack Obama look good. In 2018 when Benjamin Netanyahu - yes it really is all the same people - gave a speech claiming his spy agency Mossad had stolen 100,000 documents showing Iran had lied and was enriching uranium, Trump saw a 30-second clip and decided it must be true. It might have been. The other nations in the deal didn't think so. But rather than renegotiate, send in inspectors, react as any sane human might, Trump just went "nah", and pulled out of the deal. The other countries tried to keep it going. The International Atomic Energy Authority said there was no enrichment. But the US whacked the regime with sanctions, and Iran said it too would pull out unless they were lifted. They were not. In 2020 the IAEA said Iran had tripled its uranium stockpile, a year later it blocked access to inspectors, and by 2023 it had weapons-grade material. Over the same period, Iran's population suffered. A third were ground into poverty. The economic woes weakened the regime just enough to make it lash out. Iran was behind terror attacks worldwide, former Republican Guards were linked to planned assassinations of ex-Trump officials, and it faced internal protests too. Then Iran funded the October 7 massacre by Hamas. Cue Netanyahu, who was leading a rickety coalition and facing jail the moment it fell, cue the war in Gaza, cue pro-Palestine protests, and cue a lot of blaming Iran. This isn't hard to figure out or remember. It's just that the constant churn of new things to hold our attention never scrolls back to the start of the liveblog, or delves into the third page of search results. Iran is definitely run by a bunch of rotten eggs who could well have been pulling the radioactive wool over the world's eyes in return for a financial boost to stabilise their rule. But the best way of fixing that wasn't walking away from the only half-arsed deal anyone had. It was making a better deal, and if Trump had actually written his own biography rather than paying someone else to make him look good, he might have known how to do it. Trump's withdrawal was supported by Israel and Saudi Arabia, with 63% of US voters, most of the planet and his own advisers screaming at him not to. It was "a horrible one-sided deal that should have never, ever been made", he insisted. "It didn't bring peace and it never will." And so he destabilised and raised the oil price with sanctions, screwed regional trade which meant the price of wheat rose and people starved across several countries, and gave fresh targets to jihadis. Back in office for a second time, Trump wants a legacy and more than anything he wants the Nobel Peace Prize that Obama got, largely for diplomatic efforts with the Muslim world. Trump pledged to end the war in Ukraine "on day one" and it only got worse; he suggested building a golden beachside golf club in Gaza, and got laughed at. So his eye turned to Ayatollah Khameini, and the country which the US has done so much to make worse, for so long. Anyone with an ounce of realism in their body might wonder at the convenience with which the B-2 bombers and their bunker-busting payload were able to fly in unmolested, after the Israelis had suddenly switched attention from Gaza to take out the Iranian air defences a week earlier. It does seem odd that the imminent threat Netanyahu had predicted in 2018 bloomed 7 years later, 6 months after Trump returned to office and only after his other draft entries for the peace prize had evaporated. We might also ponder why the US president with the worst personal polls in history at this point in his leadership might be in want of some surgical strikes to appease his Muslim-hating base, and whether it would do him any harm if there were a couple of small terror attacks on US bases that would give an excuse to bomb the mullahs to the table. And having thought this far, we could ask ourselves how close to the edge of nuclear catastrophe Trump will allow the world to careen before he picks up the phone to "make a deal" which will be the bigliest, most beautiful peace deal of all time. And whether it will be worse than the one we used to have, before he ripped it to shreds out of petulance and exploited the disastrous consequences for the sake of vanity. With Iran alone, Trump has cost the world trillions. Now he is about to march an entire planet to the gates of hell, just so he can look good for marching everyone back again. And this plan works if he is a diplomatic genius able to unpick decades of crapola, and capable of remembering why and how it happened in the first place. But when all he watches is 24-hour rolling news, with constant updates about new stuff that isn't new at all, the best we can hope for is that the Nobel Committee gives him the prize now, just to make him stop.
The Herald Scotland
35 minutes ago
- The Herald Scotland
Braehead owners team up to boost 'trading synergy'
The partnership will align the marketing, management and leasing of Braehead Shopping Centre, Braehead Arena and XSite, with the owners and their advisors working to deliver a consistent approach to the customer experience across the estate. Reporting to a board comprising SGS, TDL and XPE, the asset management and operational team includes Pradera Lateral, Savills, BWP Group, Lunson Mitchenall, BGP, and Metis. Their aim is to expand the "natural trading synergy between adjacent ownerships" which currently generate £6.3 billion in annual retail and leisure spending. 'The scale and diversity of Braehead Ambition's offer means the destination is more relevant to more consumers more of the time," said Claire Barber, chief executive of SGS UK Retail. "The partnership will position Braehead as a lifestyle choice, creating even higher levels of loyalty and engagement that will drive the commercial performance of the individual assets, and the wider social and economic prosperity of the area.' SGS completed a "landmark" reorganisation of its finances in May of last year that allowed it to return to standard governance and management after falling into administration in June 2020. The group, previously known as Intu SGS, came under the control of its creditors after Intu collapsed into administration from the weight of its debts during the Covid pandemic. XSite experienced similar difficulties in the wake of the pandemic but has since recovered to welcome 2.1 million people through its doors in 2024. Earlier this year XPE announced that it will invest more than £12 million in the site which will include the opening of the world's longest indoor e-karting track and e-sports venue, K1 Speed, later this year. Barry Cox, non-executive director at XPE, said Braehead Ambition is a shared commitment to offer consumers a unique destination whose "total is greater even than the sum of the parts". "As consumers are becoming ever more discerning as to where and how they spend their time and money, bringing together the strength of our individual assets to create the strongest destination of scale in Glasgow makes total sense for our customers, our business partners, and for Renfrew," he added. Located within the shopping centre, Braehead Arena is a 5,200-seat multi-purpose events and sports venue that serves as the official home of the Glasgow Clan ice hockey team. The team and the management of the arena were taken over by Irish broadcasting company TDL in May 2023. Stephanie Weir named as new Edinburgh Airport Commercial chief (Image: NQ)
