Student loan debt is one of the most significant issues impacting Americans' lives today. As of 2023 Q1, the Federal Reserve Bank of St. Louis reported outstanding student loan debt in the United States exceeded $1.77 trillion.

Please don't ignore your debt since this can have serious consequences. In most respects, defaulting on a student loan carries the same consequences as failing to pay off a credit card. However, it can be much worse in since the government can take action to get what's owed. The federal government guarantees most 澳洲幸运5官方开奖结果体彩网:student loans and can act as a debt collector.

Please note: President Biden implemented an income-driven repayment (IDR) plan on June 30, 2023, called 澳洲幸运5官方开奖结果体彩网:the Saving on a Valuable﷽ Education (SAVE). It offers enhanced finaಞncial benefits to student loan borrowers. Three important features launched in the summer of 2023, with full 🐠regulations to take effect in July 2024.

However, on July 18, 2024, a federal court blocked the Saving on a Valuable Education (SAVE) Plan from operating until the resolution of pending legal cases. In the meantime, SAVE plan borrowers have been placed in forbearance, meaning no payments need to be made, and interest will not accrue.

First, You’re Considered Delinquent

When your loan payment is 90 days overdue, it is officially 澳洲幸运5官方开奖结果体彩网:delinquent, which gets reported to all three major credit bureaus. As a result, your 澳洲幸运5官方开奖结果体彩网:credit score can take a hit.

ﷺThat means new credit applications may get denied, or you may receive a higher interest rate associated with risky borrowers if approved for credit. A bad credit score can follow you in other ways. Potential employers often check the credit score of applicants and can use them as a measure of your character.

Cell phone service providers also check credit ratings. They may deny you the service contract you want. Utility companies may demand a security deposit from customers they don’t consider 澳洲幸运5官方开奖结果体彩网:creditworthy. A prospective landlord might reject your application.

The Account Is in Default

When your payment is 270 days late, it is officially in default. The financial institution to which you owe the money refers your account to a collection agency. The agency will do its best to make you pay, short of actions that are prohibited by the 澳洲幸🔯运5官方开奖结果体彩网:Fair Debt Collection Practices Act (FDCPA𒁏). Debt collectors also may tack on fees to cover the꧒ cost of collecting the money.

It may be years down the road before the federal government gets involved, but when it does, its powers are considerable. It can seize your 澳洲幸运5官方开奖结果体彩网:tax refund and apply it to your outstanding debt. It can garnish your paycheck, meaning it will contact your employer and arrange for a portion of your salary to be sent directly to the government.

What You Can Do

These dire consequences can be avoided, but you must act before your loan defaults. Several federal programs are designed to help, and they are open to all who have federal student loans, such as Stafford or Grad PLUS loans, although not to parents who borrowed for their childre🌃n.

Debt Forgiveness

Three similar programs, called Income-Based Repayment (IBR), 澳洲幸运5官方开奖结果体彩网:Pay As You Earn (PAYE), and Saving on a Valuable Education (SAVE), reduce loan payments to an affordable level based on the applicant’s income and family size. The government may even contribute part of the interest on the loan and will 澳洲幸运5官方开奖结果体彩网:forgive any remaining debt afterꦛ you make your payme🍷nts over a period of years.

The balance is indeed forgiven, but only after 20 to 25 years of payments. The payments may be reduced to zero, but only while the indebted person has a very low income.

The Biden administration had planned on canceling up to $20,000 of federal student debt per borrower. However, the Supreme Court ruled on June 30, 2023, that the Biden administration lacked the authority to cancel the debt.

The Supreme Court's decision put an end to the student loan forgiveness that President Biden originally announced back in Aug. 2022, which had been in legal limbo since Nov. 11, 2022.

The three-year forbearance on student loan payments and interest that began 𝓀back in 2020 ended this yea🌟r. Student loans began accruing interest on Sept. 1, while required payments restarted in October.

Saving on a Valuable Education (SAVE)

In response to the Supreme Court's decision that prevented President Biden from canceling student debt, on June 30, 2023, Biden implemented the income-driven repayment (IDR) plan called Saving on a Valuable Education (SAVE).

SAVE offers student loan borro🐭wers new and improved benefits, such as forgiving a student loan with an original principal amount of $12,𓆏000 or less after 10 years of payment (rather than the previous 20 to 25 years).

SAVE replaced the existing REPAYE plan and those already enrolled in REPAYE were automatically enrolled in SAVE. The full slate of SAVE regulations were set to go into effect on July 1, 2024. However, during the summer of 2023, three significant features went live:

• The amount of a borrower’s income protected from payments will rise to 225% of the federal poverty guidelines from 150%. So, a single borrower earning less than $32,805 annually ($67,500 for a family of four) will have no payments. Those loan holders who don’t meet this threshold will save at least $1,000 per year.
  
• Interest charges not covered by a borrower’s monthly payments will be halted so that no unpaid interest can increase the amount a borrower owes.
  
• Married borrowers who file taxes separately won’t have to include a spouse’s income in the calculation of their payment amounts.
  

For more information about SAVE, see the Department of Education’s꧒ .

The Public Service Loan Forgiveness Program 

The Public Service Loan Forgiveness Program is designed specifically for people who work in public service jobs, either for the government or a nonprofit organization. People who participate may be eligible for federal debt forgiveness after 10 years on the job and 10 years of payments.

Don't Wait, Contact Your Lender

Details of these federal programs are available online, as is information about eligibility. It is important to remember that none of these programs are available to people whose student loans have gone into default.

A good first step is to contact your lender as soon 🌃as you realize you may have trouble keﷺeping up with your payments. The lender may be able to work with you on a more doable repayment plan or steer you toward one of the federal programs.

One Upside

There is an upside to student debt. If you kee༺p up your payments, your credit score will improve. That solid credit history can be crucial for a young ad𒁃ult trying to secure that first car loan or home mortgage. 

Worst-Case Scenario

A true worst-case scenario involved a man who found armed U.S. marshals on his doorstep. He had borrowed money 29 years earlier and failed to repay the loan. The government finally sued. According to the U.S. Marshals Service, several at🌼tempts to serve him with a court order failed. Contacted by phone in 2012, he refused to appear in court.

A judge issued an arrest warrant for him that year, citing his refusal to appear. When the marshals finally confronted him outside his home, he told CNN, “[I] went inside to get my gun because I didn’t kn🌃ow who these guys were.”

That’s how you end up facing an armed posse of U.S. marshals, with local police as backup, for failure to pay a student loan of $1,500. The man said he thought he paid the debt, didn’t know about the arrest warrant, and didn't remember the phone call.

However, even this sorry story has a reasonably happy ending. Hauled into court at last, the man agreed to begin paying off his ancient student loan, plus accrued interest, at the rate of $200 a month. After 29 years of interest, the $1,500 debt had grown to around $5,700.

The Bottom Line

The government and banks have an excellent reason for working with people having trouble paying off their student loans. You can be sure that they are as 🐼anxious to receive your loan payments as you are to repay your debt.

Remember to alert the ⭕appropriate parties as soon as you see potential repayment trouble ahead. Ignoring th♌e problem will only make it worse.