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Millions of people with defaulted student loans could face severe consequences, including wage garnishment. The U.S. Department of Education. has announced that defaulted federal loans will be sent to collection agencies, affecting more than five million borrowers.
Why is it important to take action against student loan defaults?
According to White House Press Secretary Karoline Leavitt, “The federally controlled student loan portfolio totals nearly $1.6 trillion, but fewer than 4 in 10 borrowers are in repayment.”
Betsy Mayotte, founder of the Student Loan Counselors Institute, emphasized that “these are loans owed to the federal taxpayer.” Her organization offers free resources to guide families on how to manage their student debt.
How to know if your loan is in default
The first step for borrowers is to confirm whether they are actually in default on their student loans. To do so, simply log in to studentaid.gov"As soon as you log in, you'll see a red warning sign, and the loan status will clearly indicate whether you're in default," Mayotte explained.
If that's the case, you'll likely receive direct communication from the Department of Education soon. But all is not lost: there are still ways to regain control of your debt.
Options available to get out of default
In it Federal Student Aid portal You can verify who owns your loan and how to contact them. This way, you can establish a personalized payment plan and avoid foreclosures.
Failure to take action can have serious consequences: the government has the legal authority to deduct the money you owe directly from your paycheck, your tax refund, and even your Social Security check.
Fortunately, there are alternatives to get out of student loan default and back in good standing. The main options are:
- Full Loan Payment – Although not always feasible, paying off the entire balance would eliminate the default immediately.
- Loan Consolidation – Consolidating your loans into one can open up new repayment options and more flexible terms.
- Loan Rehabilitation – This option allows you to make consecutive, on-time payments based on your income and family size. “The best thing about rehabilitation is that it eliminates your credit history, as if it never existed,” Mayotte said.
Rehabilitation of defaulted student loans
If you have student loans in default, the most important thing is not to ignore them. There are reliable tools and resources to help you get out of this situation before it affects your finances and your credit history in the long run.
For more articles on financial education and student support in the U.S., visit More Latin.
For more information and free resources, visit studentaid.gov.
Source: WCVB
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