(NEXSTAR) — If you haven’t been making payments on your federal student loans, you could soon find yourself sent to collection with your wages garnished following the return of a Department of Education program.
The department announced Monday that it would restart collections in two weeks, on May 5, a process that has been on hold since the start of the COVID pandemic. While the Education Department has warned that defaulted borrowers could be sent to collections, it has offered tips to help those impacted “get back into repayment.
Here’s what to know.
When are student loans in default?
According to the Education Department, more than 5 million borrowers are in default. Another 4 million are in “late-stage delinquency” and could enter default status in a few months.
If you miss a payment on your federal student loans, even by a day, you are delinquent, the Federal Student Aid office explains. As soon as you repay the past due amount (or change a payment plan, or enter deferment or forbearance), you are no longer delinquent.
If you do not make a payment or other arrangement and your student loans remain delinquent for an extended period of time, the loans will go into default. The exact amount of time will depend on the loan, the FSA says. If you have a loan from the William D. Ford Direct Loan Program, for example, default status begins if you don’t make your scheduled payment for at least 270 days. On Perkins loans, you could be considered in default if you don’t make a payment by the specific due date.
Having delinquent loans can impact your credit score while default leads to more serious consequences. In addition to wage garnishment and a damaged credit rating, your entire loan plus any accrued interest immediately becomes due; tax refunds and federal benefits can be withheld and applied to your balance; you lose eligibility to other federal student aid, forbearance, deferment, and the ability to choose a repayment plan; and you may not be able to buy or sell assets, including your home. Your loan servicer could also take you to court and charge you for the fees associated with the collection process.
You can check the status of your loans by accessing your federal student loan servicer’s website.
How do I know if my loans are impacted?
This depends on whether or not your loans are in default. If you haven’t made a payment in several months and are not in forbearance or deferment, or on a payment plan, it’s best to check with your loan provider or via your FSA account to determine your loan status.
The Education Department said Monday that it would send “email communications” from the Federal Student Aid office between now and May 5 to make impacted borrowers “aware of these developments.” Borrowers will also be urged to contact the Default Resolution Group “to make a monthly payment, enroll in an income-driven repayment plan, or sign up for loan rehabilitation.”
Those liable to have their wages garnished will be notified by the FSA “later this summer,” the agency said.
“Involuntary collections activities” will also be allowed to begin on loans from the Federal Family Education Loan Program. Collections can only happen after “student and parent borrowers have been provided sufficient notice and opportunity to repay their loans under the law,” the Education Department said.
Involuntary collection means the government can garnish wages, intercept tax refunds, and seize portions of Social Security checks and other benefit payments to go toward paying back the loan.
What if my loans are in default?
The Education Department said it is committed to keeping borrowers informed about their payment options and will “conduct a robust communications campaign” over the next two months.
The FSA currently offers guidance on rehabilitating or consolidating loans to get out of default. Under rehabilitation, you’ll have to agree to make a certain number of payments over a specific time period, which varies based on loan type. Under consolidation, your defaulted loan or loans become a Direct Consolidation Loan, which also has specific repayment details.
In addition to helping borrowers find the best repayment plan, an “enhanced” Income-Driven Repayment process is set to be launched. IDR applications had been on pause after a federal appeals court struck down the Biden administration’s SAVE Plan. In response, the Trump administration revised the IDR application to “conform with the ruling” last month.
The “enhanced” process is intended to make it faster to enroll and eliminate the need to recertify your income annually. More information is expected next week, the Education Department said.
The agency also acknowledged that nearly 1.9 million borrowers haven’t been able to start repayment since being put on a pause while repayment plan applications were being processed. That process is expected to begin in May.
Still, Michele Zampini, senior director of college affordability at The Institute for College Access & Success, warned in a statement shared with Nexstar on Tuesday that reduced staffing at the Education Department has been weighing on borrowers.
“Borrowers were already facing long delays between applying for a plan and being enrolled in one, with the processing backlog growing by the day. Borrowers report facing extraordinarily long wait times when they reach out to their servicers, with some spending eight-plus hours on hold waiting to speak to customer support.”
What else should I know?
In addition to warning of the consequences of not repaying federal student loans, the Education Department said Monday that “there will not be any mass loan forgiveness,” something the Biden administration attempted that now-President Donald Trump and many Republicans criticized.
Though the Trump administration has said it’s important to get borrowers repaying again, “which benefits borrowers and taxpayers alike,” some are uneasy about the decision.
“We are extremely concerned by the Administration’s announcement that they plan to re-start default collections for millions of borrowers while the federal student loan system remains in a state of chaos and dysfunction,” Zampini said. “Turning the government’s draconian debt collection machine back on at this moment will cause significant financial harm to millions.”
Zampini suggested “policymakers should instead focus on restoring the Education Department’s ability to help borrowers get—and stay—out of default.”
The Associated Press contributed to this report.