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Zambia to Remain in Default With Afreximbank Until Debt Reworked
Zambia to Remain in Default With Afreximbank Until Debt Reworked

Bloomberg

time27-05-2025

  • Business
  • Bloomberg

Zambia to Remain in Default With Afreximbank Until Debt Reworked

Zambia will restructure its debt with regional lenders including the African Export-Import Bank and remain in default on those payments until the process is completed, Finance Minister Situmbeko Musokotwane said. The stance — similar to Ghana's as that country overhauls its own loans — is at odds with Afreximbank's position that its 'preferred-creditor status' means it shouldn't have to absorb losses like other commercial lenders. The difference of opinion may set the stage for a bitter dispute that could set a precedent for how Afreximbank and similar lenders on the continent have their debt treated in other restructurings.

3 things to know about defaulting on your credit card debt
3 things to know about defaulting on your credit card debt

CBS News

time23-05-2025

  • Business
  • CBS News

3 things to know about defaulting on your credit card debt

We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. There are a few things you should know before you fully default on your credit card debt. Getty Images When your credit card debt starts to spiral, it can feel like you're one unexpected expense away from disaster. And, if your budget is eventually stretched too thin by your growing card payments, putting off a payment or two might not seem like a big deal, at least initially. After all, there are other bills, like groceries or rent, that need to take priority at first. But as the interest charges compound on that debt, what once felt like simply falling behind can turn into a more serious issue: default. And while defaulting on a credit card isn't quite the same as defaulting on a mortgage or car loan, the consequences can still be severe. But despite the consequences, millions of Americans are on the brink of defaulting on their credit card debt right now. Credit card delinquencies have been steadily rising, and serious delinquencies, in particular, which are balances over 90 days past due, have increased significantly year over year. Part of the issue is that with inflation still impacting everyday costs and other economic uncertainties looming, more households are now having trouble keeping up with monthly payments. So when you add in today's nearly 22% average credit card rate, this combination of financial hurdles can be a recipe for serious issues. If you're one of the many who's teetering on the brink of defaulting on your credit card debt, there are a few important things you should know right now. Find out how a debt relief expert could help with your high-rate debt now. 3 things to know about defaulting on your credit card debt Here are three big things to know if you're worried about defaulting on your credit card debt. Default doesn't happen overnight — but it hits hard when it does Contrary to popular belief, you don't enter default the second you miss a payment. Most credit card companies won't consider your account officially in default until it's 180 days (or roughly six months) past due. That said, your credit score can take a hit much sooner. Even one missed payment, meaning a payment that's just 30 days late, can be reported to the credit bureaus and cause your score to drop significantly. Once you hit default, the credit card issuer will typically charge off the debt, meaning they write it off as a loss and may sell it to a third-party collection agency. This doesn't mean you're off the hook for the balance, however. It just means someone else now owns your debt and will aggressively pursue it, whether that's through phone calls, letters or more aggressive collection tactics. Before your account hits default, you may want to reach out to your credit card issuer. Some lenders offer temporary hardship programs or may be open to a modified repayment plan. You can also consider working with a credit counseling agency, which can help you consolidate payments and potentially reduce interest rates through a debt management plan. Explore your debt relief options and start tackling your unpaid debt today. Default can seriously damage your credit (and stay there for years) One of the most lasting consequences of default is the damage it does to your credit report. A defaulted account can remain on your credit history for up to seven years, even if you eventually pay it off. During that time, it can be harder to get approved for loans, rent an apartment or even qualify for a job in certain industries. The earlier stages of delinquency, like 30-, 60-, and 90-day late payments, will also show up on your credit report. But a charged-off account or collections action is a red flag to future lenders, signaling that you may be a high-risk borrower. If your credit has already taken a hit, don't panic, but do take steps to resolve the issue. One option you may have if you can't repay the full balance is debt settlement, also referred to as credit card debt forgiveness. This strategy involves negotiating with your creditors to pay a lump sum that's less than what you owe. Just know that debt forgiveness can also hurt your credit in the short term, but might be better than an ongoing default. This strategy can be tricky to navigate, though, so if you pursue this type of relief, you may want to work with a reputable debt relief company during negotiations. You can be sued for unpaid credit card debt Once your account has gone to collections, there's a real risk of being sued over the unpaid balance (and the additional fees, interest charges and other costs you've incurred), especially if the debt is large or hasn't been addressed for many months. Debt collectors can and often do take legal action to recover unpaid balances, and if they win a judgment in court, they may be able to garnish your wages or bank account depending on state laws. In other words, a lawsuit over defaulted credit card debt is a serious matter, and ignoring it can lead to automatic judgments against you. Many people don't realize that they have the right to respond, negotiate or even fight the lawsuit, though, which leads to more severe issues. If you're facing legal action over your defaulted card debt or think you might be soon, it's time to deal with the problem. You might qualify for protection if you file for Chapter 7 or Chapter 13 bankruptcy, which can halt collection activity and potentially discharge or restructure your debt. While bankruptcy isn't a decision to take lightly, it can be a powerful reset if you're truly unable to repay what you owe. The bottom line Financial setbacks happen, but defaulting on your credit card debt is a serious event with long-term financial consequences, so it's important to do everything in your control to avoid it happening. But if you're behind on payments currently or are facing collections, you have options worth considering. Whether it's reaching out to a credit counselor, negotiating a settlement or exploring bankruptcy, the key is to act early and not ignore the problem. With the right help and a clear strategy, default doesn't have to define your financial future.

The Student Loan Payment Mess Is About to Get Worse
The Student Loan Payment Mess Is About to Get Worse

Yahoo

time22-05-2025

  • Business
  • Yahoo

The Student Loan Payment Mess Is About to Get Worse

It's been a bumpy ride for student loan borrowers over the last five years. The first Trump administration paused federal student loan payments in 2020 when the pandemic arrived and shocked the world economy. After the 2020 election, President Joe Biden repeatedly extended the pause, but borrowers received a series of conflicting messages as officials repeatedly warned repayment was about to resume, only for the pause to extend again. Biden simultaneously pledged that broad debt cancellation was imminent. His administration secured more than $180 billion in student loan forgiveness, but the more expansive plans for debt cancellation relied on shaky executive authority, and legal challenges quickly stymied the efforts. The pauses effectively ended last October—repayment technically resumed in October 2023, but Biden waived collection enforcement for 12 more months—and in April, the Trump administration announced that debt collection for borrowers in default would resume on May 5. The music has finally stopped for the loan leeway, but after years of mixed signals, payment plan changes, and legal limbo, many borrowers aren't looking for their chairs. Millions of borrowers are already in default and millions more are now in late-stage delinquency, meaning a wave of new defaults could hit as soon as next month. 'The Biden Administration misled borrowers: the executive branch does not have the constitutional authority to wipe debt away, nor do the loan balances simply disappear,' Secretary of Education Linda McMahon said in a statement last month announcing the restart of debt collection. More than 42 million people currently have loans that total $1.6 trillion in student debt. More than 5 million borrowers are currently in default prior to the pandemic pause. They already hadn't made a payment in more than 270 days before the pause. Another 4 million are delinquent—behind in payments by three to six months—and fast approaching the point of default, according to the Department of Education (DOE). Compared to before the pauses began, the federal student loan portfolio is in dire straits, according to data from loan servicers and credit reporting agencies. In February 2020, 60 percent of borrowers covered by Nelnet, the largest student-loan servicer, were making payments. In February 2025, the number was 38 percent. An analysis released earlier this month from the credit bureau TransUnion found that in February 2025, 20 percent of borrowers were in delinquency, nearly double February 2020 levels. Newly delinquent borrowers have already begun to feel the consequences even before the restart of debt collection, experiencing hits to their credit scores as their missed payments are reported to credit bureaus. Many individuals were unaware that repayments had been unpaused. In one case reported by the Wall Street Journal, a borrower saw a nearly 300-point drop in his credit score after a technical issue caused a suspension in automatic payments on his $11,000 student loan balance and resulted in delinquency. Many borrowers who become delinquent could face problems buying a home or a car after their credit scores drop. Before the pandemic, student loan delinquency was largely concentrated among borrowers who had credit scores too low to qualify for most home or auto loans. But data from the New York Federal Reserve released earlier this month revealed that nearly half of the new delinquencies since credit reporting resumed involved borrowers with better credit. '2.4 million of the newly delinquent had scores above 620 and many would have qualified for new auto, mortgage, and credit cards before these delinquencies were reported,' the New York Fed noted in an article accompanying the release. 'These borrowers saw substantial declines in their credit standing in the first quarter and will now face steeper borrowing costs or denial for new credit.' Preston Cooper, a senior fellow at the American Enterprise Institute who researches student loan policy, told The Dispatch he's worried about the volume of defaults that could hit in the next two months once delinquent borrowers hit the 270-day mark following the end of the grace period last October. 'That's when we could start seeing some really serious consequences,' he said. People who are still missing payments by then will fall into default, and the Treasury Department will begin debt collection efforts, which include taking money out of tax refunds and Social Security benefits. The DOE's Office of Federal Student Aid (FSA) will also begin seizing up to 15 percent of defaulted borrowers' wages—a process known as administrative wage garnishment—later this summer. Policy analysts and some former officials fault the extended pause and the Biden administration's mixed messaging around student loan forgiveness for the elevated delinquency and defaults. 'Borrowers really felt a lot of whiplash over the last five years or so,' Cooper said. 'There was just stunningly inconsistent messaging from the federal government.' He criticized the crying-wolf pattern the administration fell into whenever a pause extension came close to expiring. The DOE would signal repayments were about to resume only for another extension to be granted; it issued a total of eight extensions. Cooper argued this pattern continued with the 12-month grace period after payments resumed in October 2023. 'If the Biden administration had really had a comprehensive plan to re-engage borrowers, and inform them that payments were going to resume again, try and get them transitioned into repayment plans, that on-ramp could have been very useful,' he said. 'But the Biden administration, to be quite frank, really didn't do very much, because they were still hoping to get their loan forgiveness plan through, and that was their main strategy.' Colleen Campbell, the executive director of the FSA loan portfolio management office until she resigned in March, also criticized the Biden administration's lack of communication with borrowers. '… [T]he Biden administration could have done a WHOLE LOT more to make delinquent borrowers aware of their status and options, requiring servicers to notify borrowers whose delinquencies have been reset or sending those emails from FSA,' Campbell wrote last month. 'They also could have done more outreach to defaulted borrowers to inform them that consequences of being in default would come back at some point, and that those consequences are required by law and can be devastating.' In recent weeks, the Education Department has tried to increase communication about the borrowers' renewed repayment obligations. The agency has also reached out to colleges and universities for help in informing their alumni that they need to start payments again or face the consequences of default. But at this late stage, a large number of defaults may be baked in. 'There's some things that the administration can do on the margins,' Cooper said, 'but I do worry that a lot of borrowers are simply going to roll up to default, and there's not much we can do to head that off at this point.' Even engaged borrowers face logistical and administrative hurdles in resuming payment as a result of the extended pause. Many have lost contact with the companies that service their loans. 'If you've ever had a mortgage, you know, sometimes they get sold and sent to another [company], then you have to figure out the new customer interface and log into their website and create an ID,' Beth Akers, an economist and former staffer on the Bush administration's Council of Economic Advisers, told The Dispatch. 'The same thing will have happened to a tremendous number of borrowers because of the shift in which servicers the government is using now relative to five years ago.' Some borrowers say the calls from loan servicers attempting to get in contact about repayment have been flagged as spam and their emails were buried in junk folders. Those who are in contact with their loan servicers are also facing long wait times on the phone when trying to sort out issues or errors with their payment plans. Millions of borrowers restarting payments all at once—something the system was not set up for—has swamped companies. There's also a backlog of nearly 2 million borrower applications for income-driven repayment (IDR) plans, which tie repayments to a borrower's income level. The Biden administration halted processing of IDR applications as court challenges to its expanded payment and forgiveness programs played out. Resolving the backlog likely won't be helped by the Trump administration's decision to cut half of all DOE staff. The FSA—the office responsible for federal student loan and aid programs—was gutted, and DOE officials who have recently resigned predict the agency will struggle to administer its programs. 'There's a population of borrowers out there who are trying to get onto IDR plans, but are struggling to, because of administrative issues and the ongoing litigation around those plans,' Tristan Stein, associate director for higher education at the Bipartisan Policy Center, told The Dispatch. Millions of borrowers remain in limbo as cases challenging the Biden administration's Saving on a Valuable Education (SAVE) payment plan continue. When the courts enjoined SAVE last summer, the approximately 8 million borrowers who enrolled in the plan were placed in forbearance. Sooner or later, SAVE is almost certainly headed for the dumpster. The Trump administration could have initiated rulemaking to undo the program just as the Biden administration created it. But congressional Republicans likely wanted to keep the program alive long enough for them to count the spending savings from ending SAVE as part of their calculations for the reconciliation package, which is set to also include large tax cuts. More changes could be coming as GOP lawmakers eye a major overhaul of the federal student loan system. Congress' huge reconciliation bill includes a House proposal that would pare payment programs down to two plans, a standard option and an income-based repayment option. It would also cut back on the amount of debt borrowers can take on, including entirely eliminating the Graduate PLUS program, which allowed for effectively uncapped borrowing towards graduate and professional degree programs. And significantly, the proposed legislation establishes loan risk sharing, with colleges and universities being responsible for bearing some of the costs for students who default on loans. 'It is a serious proposal that seeks to, on the one hand, reduce the cost of IDR and on the other hand, address some of the historic challenges we've seen with IDR plans,' Stein said of the House reform package. He added that Congress taking back its legislative role in improving federal loan programs would help address uncertainty introduced by executive action, such as Biden's forgiveness plans. 'This is where long-standing, more-permanent solutions from the legislature would be helpful for putting all this on a much more stable foundation and making the whole thing much more navigable for borrowers,' he said. But the reconciliation process is far from over, and any future legislative changes won't affect the wave of defaults that could hit in just over a month. 'The consequences really are coming back with a vengeance right now,' Cooper said. 'I'm not sure that has really sunk in among borrowers, that this time is for real.'

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