Live: Student Loan Default Collections Are Back
Mark your calendar — May 5 isn't just Cinco de Mayo anymore. It's also the day student loan default collections officially restart. Not nearly as festive, but arguably just as important.
For those that may be behind on student loan payments, this isn't just an "Oopsies, silly me" situation anymore. Uncle Sam doesn’t find you silly. Not. One. Bit.
So what? Ignoring your student loans could mean losing part of your paycheck, saying “ciao!” to your tax refund, and to fumbling your credit score — all without a single hearing. No lawyer. Just money gone.
Learn: Consequences of Default
Defaulting on your student loan makes your last midterm grade look like it was good.
Here are some of the potential consequences:
Wage Garnishment: Your employer could start sending part of your paycheck straight to Uncle Sam for repayment.
Tax Refund Seizure: The government takes whatever refund you may have had to pay off your loan.
Credit Score Damage: Default punches your credit score face, in the face. That likely means higher interest rates, rejected apartment applications, and sad Tinder dates where you get clowned for your low credit score (that's how Tinder dates go right?).
And you don't get a court hearing before these effects go into effect.
To avoid default it is important to think about how student loans affect your options moving forward. These loans are something you will need to pay off consistently for years. With that in mind:
Consider jobs that will provide the income and stability to repay your loans with low stress.
Try gamifying paying off your loans. Keep track of and celebrate your progress as you get closer to being rid of them.
And have a full picture of what your loans will look like.
A useful tool for this is...
Leverage: FederalStudentAid.gov: Your (not so) Secret Weapon
If you're reading this, I suspect you haven't defaulted into devastation. That said, look up FederalStudentAid.gov. It's like WebMD for your loans, but less "you’re definitely dying" and more "here’s an actual plan."
Gif by SearchlightPics on Giphy, WebMD when I look up how I got sunspots.
Federal Student Aid is useful to…
Learn all the effects of default.
Compare payment plans — fixed payments vs. income-driven repayment (IDR).
Use their loan repayment simulator.
Fully understand what repayment looks like.
There are a lot more materials as well.
The main downsides to this resource I would say is that the website is a bit clunky, and sometimes you may need to end up Googling what some stuff means on the website because it is not always explained simply. Otherwise it’s pretty good.
You don't have to have it all figured out today, but doing nothing is not an option.
Launch!
Take Inventory of Your Loans.
Look into your debts (whatever they may be) — student loans, credit cards, that "interest-free" financing plan for the mechanical bull you bought for that one party — and map out where you stand.
Gif by DaltonDover on Giphy, I’m sure the party was awesome.
Then, pick your first move: call your loan servicer, sign up for Income Driven Repayment, or set up auto-pay. Focusing on paying down the highest interest debt is a common recommended strategy.
The best way to avoid debt is to take control of it. Don't let your finances get away from you ;).
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