For millions of student loan borrowers hoping for relief from Washington, things might get more complicated in the months ahead. The Biden administration’s one-year grace period from the Covid-era delay on repayments has expired.
Banks could begin to hit debtors who haven’t begun paying back their student loans with a collection action. Financial experts say it generally takes between nine and 12 months for somebody to face the consequences of defaulting.
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People who default on their student loans could face garnishment of their wages, loss of eligibility to get a mortgage and credit rating difficulties.
A federal judge recently blocked President Joe Biden’s second attempt at mass debt cancellation. The U.S. Supreme Court rejected his first attempt in 2023.
The Biden administration also tried to offer new loan repayment plans. However, those have also been tied up in the courts.
Experts said those in deep student loan debt at the federal or state level can try to file an Economic Hardship Deferment. Debtors would need to file a form and answer questions about their ability to repay and work situation. However, only those with loans like Perkins or Federal Family education loans can apply.
Somebody out of work can file a similar form called an Unemployment Deferment Request.
Another option would be to file for student loan forbearance. In this case, the loan provider decides whether to grant the person in debt a chance to make no payment or a smaller payment for a period up to one year, before the case is reviewed again.
Borrowers should receive multiple notices before they go into default or delinquency.
Looking ahead, President-elect Donald Trump said on the campaign trail he would try to roll back the Biden administration’s effort to forgive student loan debt, calling it illegal.
