Latest news with #DefaultResolutionGroup
Yahoo
04-05-2025
- Business
- Yahoo
Student loan collections restart May 5: Here's what you need to know
The federal government on Monday will resume collecting defaulted student loan payments from millions of people for the first time since the start of the pandemic, officials said. The Trump administration said it would collect the debt through a Treasury Department program that withholds payments through tax refunds, wages and government benefits. The U.S. Education Department has not collected on defaulted loans since March 2020. Of the nearly 43 million people who owe money, only a little more than a third have made regular payments, the agency said. In the last five years, student debt has grown to $1.6 trillion, officials said. Education Secretary Linda McMahon said taxpayers would now be saved from shouldering that cost. 'American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,' McMahon said in an April 21 news release announcing the restart of collections. The move comes after years of legal back-and-forth about loan forgiveness and at a time when advocates say student borrowers are stretched thin from inflation and growing concerns over the cost of living. 'We're in the worst student loan landscape that we've ever been before,' said Sabrina Calazans, executive director of the Student Debt Crisis Center, a nonprofit that advocates for student debt cancellation. 'The plans and proposals being put forth by the Trump administration are going to harm millions of individuals and families,' Calazans added. 'It's going to create a financial catastrophe where folks will not be able to meet their basic needs.' All borrowers in default should have received an email from the Office of Federal Student Aid alerting them to the changes. Officials said the email urges borrowers to contact the Default Resolution Group to either make a monthly payment, enroll in an income-based repayment plan or sign up for loan rehabilitation — a process that can erase a default status if the borrower makes a set of payments during a specific time frame, depending on the type of loan. To schedule monthly payments, borrowers who have not changed their marital status or income would have needed to send their most recent Federal 1040 tax return to the Education Department, according to instructions outlined on the Default Resolution Group's website. The Education Department said it will be using the Treasury Department's Offset Program to collect on the debt by withholding payments through tax refunds, salaries and benefits like Social Security payments. Under the program, the government can withhold entire federal tax refunds and up to 15% of a federal worker's disposable pay. The government said the FSA would send notices about wage garnishment later this summer. In an April opinion piece published in The Wall Street Journal, McMahon said borrowers who don't make payments on time will see their credit scores go down, 'and in some cases their wages automatically garnished.' Before leaving the White House in January, then-President Joe Biden announced his administration had canceled student debt for more than 5 million people, including many who attended schools that defrauded students, like DeVry University, as well as public service workers and those with total and permanent disabilities. 'Since Day One of my Administration, I promised to ensure higher-education is a ticket to the middle class, not a barrier to opportunity, and I'm proud to say we have forgiven more student loan debt than any other administration in history,' Biden said in a statement at the time. In its April news release, however, Trump's Education Department made it clear that 'there will not be any mass loan forgiveness' going forward. McMahon blamed the Biden administration for transferring hundreds of billions of dollars in debt to taxpayers and keeping borrowers in a 'confusing limbo' about payments. 'The executive branch does not have the constitutional authority to wipe debt away, nor do the loan balances simply disappear,' she said. Trump paused collection on most federal student loans in March 2020, and Biden continued to pause collection when he took office in 2021. Biden had proposed allowing eligible borrowers to cancel up to $20,000 in debt until the U.S. Supreme Court ruled against his student loan debt relief plan in 2023. The plan would have cost more than $400 billion, and about 43 million Americans would have been eligible to participate. In the Wall Street Journal op-ed, McMahon said Biden 'never had the authority to forgive student loans across the board.' She said resuming collections was not an act of unkindness to student borrowers but an act of fairness. 'Borrowing money and failing to pay it back isn't a victimless offense. Debt doesn't go away; it gets transferred to others,' she said. 'If borrowers don't pay their debts to the government, taxpayers do.' This article was originally published on
NBC News
04-05-2025
- Business
- NBC News
Student loan collections restart May 5: Here's what you need to know
The federal government on Monday will resume collecting defaulted student loan payments from millions of people for the first time since the start of the pandemic, officials said. The Trump administration said it would collect the debt through a Treasury Department program that withholds payments through tax refunds, wages and government benefits. The U.S. Education Department has not collected on defaulted loans since March 2020. Of the nearly 43 million people who owe money, only a little more than a third have made regular payments, the agency said. In the last five years, student debt has grown to $1.6 trillion, officials said. Education Secretary Linda McMahon said taxpayers would now be saved from shouldering that cost. 'American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,' McMahon said in an April 21 news release announcing the restart of collections. The move comes after years of legal back-and-forth about loan forgiveness and at a time when advocates say student borrowers are stretched thin from inflation and growing concerns over the cost of living. 'We're in the worst student loan landscape that we've ever been before,' said Sabrina Calazans, executive director of the Student Debt Crisis Center, a nonprofit that advocates for student debt cancellation. 'The plans and proposals being put forth by the Trump administration are going to harm millions of individuals and families,' Calazans added. 'It's going to create a financial catastrophe where folks will not be able to meet their basic needs.' What happens now? All borrowers in default should have received an email from the Office of Federal Student Aid alerting them to the changes. Officials said the email urges borrowers to contact the Default Resolution Group to either make a monthly payment, enroll in an income-based repayment plan or sign up for loan rehabilitation — a process that can erase a default status if the borrower makes a set of payments during a specific time frame, depending on the type of loan. To schedule monthly payments, borrowers who have not changed their marital status or income would have needed to send their most recent Federal 1040 tax return to the Education Department, according to instructions outlined on the Default Resolution Group's website. The Education Department said it will be using the Treasury Department's Offset Program to collect on the debt by withholding payments through tax refunds, salaries and benefits like Social Security payments. Under the program, the government can withhold entire federal tax refunds and up to 15% of a federal worker's disposable pay. The government said the FSA would send notices about wage garnishment later this summer. In an April opinion piece published in The Wall Street Journal, McMahon said borrowers who don't make payments on time will see their credit scores go down, 'and in some cases their wages automatically garnished.' What happened to loan forgiveness? Before leaving the White House in January, then-President Joe Biden announced his administration had canceled student debt for more than 5 million people, including many who attended schools that defrauded students, like DeVry University, as well as public service workers and those with total and permanent disabilities. 'Since Day One of my Administration, I promised to ensure higher-education is a ticket to the middle class, not a barrier to opportunity, and I'm proud to say we have forgiven more student loan debt than any other administration in history,' Biden said in a statement at the time. In its April news release, however, Trump's Education Department made it clear that 'there will not be any mass loan forgiveness' going forward. McMahon blamed the Biden administration for transferring hundreds of billions of dollars in debt to taxpayers and keeping borrowers in a 'confusing limbo' about payments. 'The executive branch does not have the constitutional authority to wipe debt away, nor do the loan balances simply disappear,' she said. Trump paused collection on most federal student loans in March 2020, and Biden continued to pause collection when he took office in 2021. Biden had proposed allowing eligible borrowers to cancel up to $20,000 in debt until the U.S. Supreme Court ruled against his student loan debt relief plan in 2023. The plan would have cost more than $400 billion, and about 43 million Americans would have been eligible to participate. In the Wall Street Journal op-ed, McMahon said Biden 'never had the authority to forgive student loans across the board.' She said resuming collections was not an act of unkindness to student borrowers but an act of fairness. 'Borrowing money and failing to pay it back isn't a victimless offense. Debt doesn't go away; it gets transferred to others,' she said. 'If borrowers don't pay their debts to the government, taxpayers do.'
Yahoo
30-04-2025
- Business
- Yahoo
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: 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. 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. 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. 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. Learn more about deferment from the Federal Student Aid office.
The Independent
30-04-2025
- Business
- The Independent
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.
Axios
23-04-2025
- Business
- Axios
What to know about involuntary collections, student loan payments
The Department of Education announced this week that it will start referring student loan borrowers in default to debt collection. Why it matters: After a five-year penalty pause, the 5.3 million borrowers in default could see their wages garnished if they don't resume payments. Here's what to know: When will collections resume? State of play: The department will begin involuntary collections on May 5 through the Treasury Offset Program, which collects delinquent debts that people owe to government agencies, through wage garnishment. Wage garnishment is a legal procedure in which employers are ordered to withhold a person's earnings for the payment of a debt, such as unpaid child support. There will be a 30-day notice, after which the department will begin garnishing wages for borrowers in default. Student loans are considered default after 270 days without payments. Why was there a pause? Federal student loans, including those in default, have not been referred for collection since March 2020, when leniency was initiated during the COVID pandemic. How many people owe money? By the numbers: Only 38% of borrowers are up to date on their student loans, according to the department. 4 million borrowers are in "late stage delinquency," officials said, or 91 to 180 days delinquent. There could be nearly 10 million borrowers in default in a few months, according to the department, meaning almost a quarter of borrowers will be delinquent. How can people make payments? Borrowers in default will receive an email in the next two weeks about the policy update, the department said. Borrowers can contact the government Default Resolution Group to make a monthly payment. What are the next steps for borrowers? Borrowers can sign up for an income-driven repayment (IDR) plan or loan rehabilitation. Income-driven repayment plans, like Saving on a Valuable Education (SAVE) launched under the Biden administration, are calculated based on a borrower's income and family size, rather than loan balances. A federal court prevented the implementation of SAVE and other IDR plans in February, leading to the temporary removal of applications from the Education Department website. As of March 26, 2025, however, the online IDR application is once again available. After the injunction, there was brief confusion over whether changes to the program meant that married borrowers on an IDR plan could be required to make higher loan payments, but the department later clarified that they would not. Yes, but: Some experts are worried that SAVE is on the chopping block. Jason Delisle, a nonpartisan higher education researcher with the Urban Institute, told NPR last month that congressional Republicans want to kill SAVE as part of their budget reconciliation bill, Beth Akers, a higher education researcher at the conservative-leaning American Enterprise Institute (AEI), told NPR that Republicans could use the savings to help pay for President Trump's tax cuts, but if the courts ended it first, Republicans' legislative savings would evaporate. What else is the Education Department doing for borrowers? The department said that there are several tools for borrowers, such as extended loan servicer call center hours and an AI assistant to help find a repayment program.
