The Whitsdom Press

Tag: student loan debt

  • Student Loan Collections Are Back: What Borrowers Should Do Now

    After a three-year pause, the U.S. Department of Education is restarting harsh measures to collect defaulted federal student loans. Actions like seizing tax refunds, garnishing wages, and withholding Social Security benefits will resume, ending a temporary halt put in place during the COVID-19 pandemic. Here’s what borrowers need to know—and how to protect themselves.

    Why Are Collections Restarting Now?

    During the pandemic, the government paused most aggressive collection tactics to ease financial strain on borrowers. But as federal relief programs wind down, the Education Department is shifting back to pre-pandemic rules. Officials argue this move is part of a “return to normal,” but critics warn it could push already struggling borrowers deeper into hardship.

    “Beginning May 5, the department will begin involuntary collection through the Treasury Department’s offset program, which withholds payments from the government — including tax refunds, federal salaries and other benefits — from people with past-due debts to the government,” the department said in a statement. Wages will be garnished following a 30-day warning, it added. — NBC News

    How Does This Affect You?

    If your federal student loans are in default (meaning you’ve missed payments for at least 270 days), you could face:

    • Tax Refund Offsets: The government may take your federal tax refund to repay your debt.
    • Wage Garnishment: Up to 15% of your paycheck could be withheld.
    • Social Security Garnishment: Monthly benefits may be reduced (applies to older borrowers).

    What Can You Do to Avoid Collections?

    Don’t panic—there are ways to get out of default and stop these penalties:

    1. Loan Rehabilitation: Agree to make nine affordable monthly payments (as low as $5) over ten months. Successfully completing this removes the default from your credit report.
    2. Consolidation: Combine your loans into a new Direct Consolidation Loan. You’ll need to either make three on-time payments or enroll in an income-driven repayment plan.
    3. Contact Your Servicer: Reach out to discuss options like payment pauses, reduced payments, or alternative plans.

    Critics Raise Concerns

    Advocates for borrowers argue that restarting these tactics ignores the ongoing struggles many face. “Taking money from Social Security or wages could devastate families still recovering from the pandemic,” said one nonprofit representative. They’re urging the government to expand relief programs instead.

    Stay Proactive

    If you’re at risk of default—or already there—act now:

    • Visit StudentAid.gov to explore repayment plans.
    • Call your loan servicer to discuss solutions.
    • Consider free help from a nonprofit credit counselor.

    The Bottom Line

    While the return of collections is stressful, borrowers have tools to fight back. Addressing the issue early can help you avoid penalties and regain control of your finances. Stay informed, explore your options, and don’t wait—the sooner you act, the more you can protect yourself.

    Have questions or tips to share? Drop them in the comments below!

    Note: This article is for informational purposes only. For personalized advice, consult a financial professional.

  • Navient’s $120 Million Bombshell: How It Could Change Your Student Loan Forever!

    In a significant development for student loan borrowers, Navient is a major player. It is one of the largest student loan servicers in the United States. It has agreed to a $120 million settlement with the Consumer Financial Protection Bureau (CFPB). This settlement marks the end of a prolonged legal battle. The battle began in 2017, when the CFPB accused Navient of misleading borrowers and engaging in unfair practices.

    What Happened?

    The CFPB’s lawsuit against Navient alleged several serious violations:

    1. Misleading Borrowers: Navient was accused of providing borrowers with incorrect information, leading many to make suboptimal financial decisions. This included steering borrowers into costly forbearance plans instead of more affordable income-driven repayment plans.
    2. Improper Payment Processing: The company allegedly mishandled payments, causing borrowers to incur unnecessary interest charges and fees.
    3. Credit Reporting Issues: Navient was also accused of tarnishing the credit reports of disabled borrowers, including severely injured veterans.
    4. Inadequate Complaint Handling: The CFPB claimed that Navient failed to adequately address formal complaints lodged by borrowers.

    The Settlement

    Under the terms of the settlement, Navient will pay $120 million. Of this amount, $100 million is earmarked for direct compensation to impacted borrowers. The remaining $20 million will go to the CFPB’s civil penalty fund. Additionally, Navient has agreed to exit the federal student loan servicing business permanently.

    Impact on Borrowers

    The settlement has several implications for borrowers:

    1. Financial Relief: Borrowers who were misled or otherwise harmed by Navient’s practices will receive compensation. This financial relief can help alleviate some of the burdens caused by improper loan servicing.
    2. Improved Loan Servicing: Navient is exiting the federal student loan servicing market. As a result, borrowers can expect their loans to be managed by other servicers. This change aims to improve the overall quality of loan servicing. It also seeks to reduce the likelihood of similar issues occurring in the future.
    3. Increased Accountability: The settlement sends a strong message to other loan servicers about the importance of fair and transparent practices. It underscores the CFPB’s commitment to protecting borrowers and holding servicers accountable for their actions.

    Conclusion

    Navient’s $120 million settlement is a significant victory for student loan borrowers. It is also a crucial step towards ensuring fair treatment in the student loan industry. The financial compensation will provide immediate relief to many. Improved loan servicing practices and increased accountability will benefit countless borrowers in the years to come.