It’s been about five years since the Biden Administration paused college loan repayments.
Last month, President Donald Trump announced collections would resume beginning May 5.
According to the Department of Education, more than 5 million borrowers have not made a payment in more than 360 days.
This number could double to 10 million in just a few months.
Michael Neuenschwander from Outlook Wealth Advisors says do not sit back and wait and hope your loan gets forgiven.
Take action now.
“Right now for people that are in default who basically the education department has now been authorized to work with the treasury to essentially begin holding back tax refunds, if you are a federal worker, they can hold back your salary, the same mechanism they’ve used to collect from when people owe taxes,” says Michael Neuenschwander, of Outlook Wealth Advisors.
Neuenschwander says those in default will get a 30 day notice.
After 30 days without a response, your wages will be garnished.
But he adds, you can take several steps now to prevent payments from being stripped from your accounts.
1: Start payments now
Pay whatever you can pay asap.
2: Income-driven repayment plan
To make it more affordable sign up for an income-drive repayment plan.
These plans are based on how much you make and can lower your monthly student payments.
3: Deferment
You may be able to temporarily pause payments through deferment.
Deferment postpones payments and interest.
4: Forbearance
Forbearance only pauses payments while interest continues to grow.
5: Career change
You can look into a career or job change where your debt would be forgiven after working there for a few years.
“Some career paths actually will forgive your student loans automatically, such as teachers, going into the military, other special programs, churches or religion. If you are open to those fields and you’re still a student, those may be an avenue,” adds Neuenschwander.
Some payment plans may extend the life of your loan to 10,20,30 years which Neuenschwander says may not necessarily be a good thing.
Remember the lower the monthly payment, the longer it takes to pay off and interest continues to build.
But remember, whatever you do, don’t just do nothing.
