The administration of President Donald Trump resumes collections on borrowers of default student housing for the first time in five years.
On Monday, the Ministry of Education announced that it would give the default borrowers in the reimbursement on May 5.
“The borrowers who do not make payments in time will see their credit ratings drop, and in some cases their salary has automatically garnished,” wrote the Secretary of Education Linda McMahon in an opinion article in parallel to the announcement.
The ministry has not received on student loans by default since March 2020, as one of the rescue measures implemented at the start of the pandemic. From May, the Federal Student Aid Office will restart the compensation program of the Treasury, which retains the benefits of the government, including social security and tax reimbursements, people with past payments. After 30 days, the Treasury Department would begin to garnish salaries for default borrowers.
The press release from the ministry said that the FSA would contact the default borrowers in the next two weeks to urge them to restart payments.
“If you are a student borrower with a federal loan balance and you have not made payments, you must restart payments now,” said McMahon. “Our Federal Bureau for Aid to Students provides all forms of assistance that we can legally to ensure that a monthly payment can adapt to your budget.”
More than 5 million student loan borrowers are in default, or more than 270 days later. The New York Federal Reserve recently estimated that more than 9 million borrowers were late on their invoices, but not yet in default, after the expiration of the Pandemic era protections.
Some democratic legislators previously raised the alarm on the consequences of a defect for borrowers of student speakers. Last year, senator Elizabeth Warren led a group of her colleagues to urge the Biden administration to put an end to the practice of retaining social security services for default borrowers.
It is a “particularly devastating practice for the elderly and people with disabilities who count on social security as the only source of income,” said legislators.
The Trump Education Department has recommended that borrowers failing to contact the default resolution group to make a monthly payment or register for a income focused on income.
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