Federal student loan collections resume after five-year pause

After a five-year pause prompted by the COVID-19 pandemic, the federal government has resumed collection efforts on defaulted student loans as of today.

(CNN)- After a five-year pause prompted by the COVID-19 pandemic, the federal government has resumed collection efforts on defaulted student loans as of today.

Defaulting on a student loan typically means a borrower has missed payments for 270 days or more. According to the U.S. Department of Education, more than five million borrowers are currently in default, with another four million at least 90 days behind on payments.

Personal finance columnist Jessica Roy of the San Francisco Chronicle warns that ignoring the problem won’t make it go away.
“You can’t just say, ‘Well, I think that’ll all work itself out,'” Roy said.

The consequences of default can be serious. Federal and state benefits may now be garnished, and wage garnishments are expected to begin later this summer.

“If your debt gets sent to collections, that goes on to your credit report, and that can impact your ability to get an apartment, a mortgage, a car loan,” Roy added. “Even some employers check.”

Experts recommend that borrowers visit their loan servicer’s website to verify their current loan status and update their contact information. For those at risk of defaulting, several options are available, including income-driven repayment plans, deferment or forbearance, consolidation, or refinancing.

The Department of Education says borrowers already in default may be able to restore their status through a process called rehabilitation. More information is available through the department’s Default Resolution Group.

“It’s time to buckle down and figure out how you can make those payments,” Roy said.