While student loans can certainly fill the funding gap and help students pay for college, they come with a host of challenges. Student loans always seem to be in the news—from massive national student loan debt to proposed programs to try and tackle the issue. In current student loan news, the government is increasing its efforts to collect on delinquent student loans.
Here’s what you need to know:
Student Loan News: The US Is Coming After Delinquent Loans
The Treasury Department is currently going after $3.3 billion in student loan debt in just the first six months of the 2019 fiscal year, up from $2.9 billion in 2018. According to a Student Loan Planner survey, borrowers are stating the government is calling them daily while also calling family members and even neighbors about their loans. These tactics have resulted in nearly 2,500 complaints to the Consumer Financial Protection Bureau.
Currently, there is over $1.5 trillion in student loan debt in the United States, with 44.7 million students handling that debt. And over 11% are delinquent or in default. However, that also includes private loans.
Let’s talk purely federal for a moment. There are 42.9 million borrowers who have taken out over $1.44 trillion in federal student loans. Of the 34.2 million borrowers within the Direct program, 5.1 million have their loans in default. That’s $101.4 billion in default.
What Happens If You Don’t Pay?
There are quite a few penalties if you don’t pay back your federal student loans and are delinquent. First, you may find during tax season you no longer receive your federal income tax refunds and possibly won’t be granted your state tax refunds or any Social Security payments you may be receiving. Other penalties include having your driver’s license confiscated or your wages garnished.
The federal government may also decide to give your loan to a private collection agency. If this happens, you could find your loan increase with fees, costs, interest, or other amounts.
If you believe you are going to have trouble paying back your student loans, it’s important to look into resolution before it becomes a bigger problem. Prevention is key. There are routes for you to take that could make your loan more affordable or give you more space until you have to pay it back. Ignoring the issue at hand can make it much worse down the road.
What Are Your Options if You Can’t Pay?
Although federal student loans have a six month grace period after you graduate or leave school, some students find that isn’t enough time or they haven’t found a job yet to start paying back the money. If you find yourself in this situation, you have a few options.
First, you will need to contact your loan servicer to discuss your options. You want to keep your loan in good standing if possible. You may find you can refinance your loan, change your repayment plan, or take part in a deferment or forbearance depending on your situation. Not all borrowers will be eligible for a deferment or forbearance so it’s important to talk to your loan servicer.
Never just hope that your loan will go away if you ignore it. If you find you’re going to have trouble paying your loan, reach out to discuss your options as soon as possible. Be sure to also pay attention to student loan news, to keep on top of any policy changes that may affect you.