Richelle, 37, an education administrator, Los Angeles, CA Yet she is still struggling under St. She is anticipating this huge $239,000 student loan debt weighing down on her. Yet with monthly payments likely to be in the ballpark of $3,000, Brooks is in a bind. He’s among millions of borrowers who will soon face threats of wage garnishment as temporary federal relief programs expire.
If you have been waiting, the Biden administration’s grace period is over. Today, borrowers such as Brooks are in a tough spot. This program, which put an end to accruing late fees and missed payment defaults, ended in the fall. Unsurprisingly, experts calculated that by August nearly 3 million borrowers are likely to enter default. This status, enforced by the federal government, is calculated as being 270 days late on any payments. Those in default may face wage garnishment orders, where the government can deduct up to 15% of their paychecks until arrears are settled.
The Department of Education mandates that borrowers receive a 30-day notice before any wage garnishment order is sent to their employer. This requirement gives borrowers a chance to rectify their circumstances without the immediate threat of their wages being deducted against their will.
Brooks is still trying to figure out how she’s going to pay her debt. She intends to take coding classes at least part-time, which may give her loans deferment eligibility. If approved for deferment, she would be relieved from making monthly payments while she’s in school. Another sign of urgency is the fact that her situation is known. She worries what will happen if she begins to miss a payment.
“We just came out of the moratorium — not paying for five years. People getting these notices — they’re terrified. I’m uneasy, too,” – Richelle Brooks
The consequences of skipping out on student debt go well past short-term fiscal challenges. Borrowers are being threatened with sudden and severe cuts to their monthly budgets, worsening an already difficult economic situation. Kyra Taylor, staff attorney at the National Consumer Law Center, called for more proactive measures to protect borrowers.
“The most important thing borrowers can do before administrative wage garnishment restarts is to log into studentaid.gov to check whether their federal student loans are in default and take steps now to remove them from default,” – Kyra Taylor
Taylor also emphasizes that borrowers who are notified of an incoming garnishment should know they have the right to demand a hearing within 30 days. In such cases, the Department of Education should stop all garnishment activities. They’ll hold off until a judge decides on the borrower’s objections and request for a financial hardship waiver.
Aissa Canchola Bañez, policy director at the Student Borrower Protection Center, sheds light on how unaware people are about these risks.
“Because this hasn’t happened for so long, there are many people who have no idea they’re at risk,” – Aissa Canchola Bañez
Bañez recommends that borrowers contact their local congressional office. As she notes, these offices have hundreds of teams in place and prepared to dive into constituent casework. That’s because they can assist people in resolving problems with federal agencies, like the Department of Education.
Whole teams in these offices orient themselves around constituent casework. They help you out when you have a problem with a federal agency, such as the Department of Education.
The student loan repayment landscape is shifting. Borrowers will need to proceed with caution with their choices as garnishments have recently begun again with the end of moratoriums. Even more concerning is the repayment restart for millions of borrowers just over the horizon. Hundreds of thousands of people have already had a hard time managing their debt.
Now millions of borrowers are stuck dealing with mental health impacts from the pandemic just as they plan to restart payments. Wage garnishment harassment only serves to raise stress levels for millions of Americans. This is particularly true for people who have recently exited a decade-long payment pause. Regardless, the transition back to repayment will be a monumental task that will demand American borrowers’ vigilance and proactive engagement with debt management resources.
