ST. LOUIS – On April 22, the White House put Americans with unpaid student loans on notice. Tuesday, May 5 marked the first day the Office of Federal Student Aid restarted collections on defaulted federal student loans. By the end of the summer, the U.S. Department of Education says 5.3 million defaulted student loan borrowers could have their wages garnished.
“Borrowers are struggling to pay rent. They’re struggling to pay for groceries, childcare, medical care; everyday living essentials,” Belleville native Khandice Lofton said.
Lofton is an attorney for the Student Borrower Protection Center.
“We’re fighting for the administration to keep affordable payment plans available. Unleashing this machinery right now is only going to cause more harm to borrowers,” Lofton said. “At the least, borrowers should be able to afford to pay their student loan debt.”
Referrals for collection on defaulted student loans were put on hold in March 2020 because of the COVID-19 pandemic. The Biden administration extended the grace period, but that ended in October.
“Borrowers that we’ve spoken to want to pay their student loan debt, but they have a right to afford to do so and that’s the problem right now,” Lofton said.
“The best thing people can do is come to the table and come up with a payment plan. Come up with paying something back to start making good on the money they borrowed,” Mike DiSalvo, founder of financial planning and wealth management firm Purpose Path Capital, said.
“People may think that they’re okay if they’re delinquent but not in default and we would encourage them otherwise, because default is when your credit score is really going to be impacted.”
DiSalvo says taking proactive steps to avoid garnishment can save you money now and in the future.
“That’s not being directly applied to your student loan. It’s going to cover the cost of getting the money,” he said. “There are administrative costs and there’s a lot of administrative fees associated with actually administering these repayment plans.”
“Turning on collections for the most vulnerable people is awful and it’s a mess but there are people out there that are willing to help you,” Lofton said.