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Federal Student Loan Collections Resume in Pennsylvania

Borrowers in Pennsylvania brace for the resumption of federal student loan collections.

News Summary

As of May 5, 2023, federal student loan collections will resume in Pennsylvania after a pandemic-related pause. This decision affects hundreds of thousands of borrowers in the state, with many facing the risk of wage garnishment and tax refund offsets. Advocates express concerns over the implications of this transition, given the existing challenges many borrowers face. With 5.3 million nationwide in default, it’s essential for Pennsylvania borrowers to explore options like loan rehabilitation and stay informed about their obligations.

Attention Borrowers in Pennsylvania: Federal Student Loan Collections Set to Resume!

As the calendar flips to May, borrowers in Pennsylvania are gearing up for a significant change in their financial landscape. The Department of Education is set to resume collecting on federal student loans that have been in default since the pandemic halted payment requirements back in 2020. This upcoming collection will impact hundreds of thousands of individuals across the state, and it’s time to get informed!

The Numbers Behind the Story

To put things into perspective, a staggering 5.3 million borrowers nationwide are currently in default on their federal student loans. Here in Pennsylvania, the total student loan debt weighs in at a hefty $66.3 billion, averaging around $36,267 per student. It’s clear that student loan debt is no small problem, as roughly 14.1 percent of residents carry this burden. The return to active collections symbolizes the end of the leniency that many borrowers have appreciated during these challenging times.

What’s Changing?

Starting from May 5, collection activities will officially kick off through the Treasury Department’s offset program. This means government payments could be withheld from those with past-due debts, impacting tax refunds and other federal payment methods. As far as wage garnishment goes, borrowers will receive a 30-day notice before any deductions from their paychecks start happening.

Borrowers’ Concerns

40 percent of borrowers making payments currently, the pressure is about to intensify.

When borrowers miss payments for a period of nine months, they tumble into default. This has detrimental effects, including damaging credit scores and leading to collection agencies getting involved. Adding to the concern, nearly 4 million borrowers are reported to be 91 to 180 days behind on their payments! Ouch!

What are Borrowers to Do?

loan rehabilitation. This plan requires proof of income and entails making nine consecutive payments. However, there’s a catch; borrowers can only enter a loan rehabilitation program one time in their lifetime, so it’s crucial to handle this opportunity wisely!

A Look Back at the Policy Shift

5 million borrowers. But those plans faced a major roadblock when the U.S. Supreme Court rejected a proposal for broader relief, adding to the sense of uncertainty surrounding the federal student loan program.

Looking Ahead

In summary, if you’re one of the many borrowers navigating the complexities of federal student loans in Pennsylvania, it’s time to stay informed and prepare. May brings with it a renewed wave of responsibility, so make sure you’re ready to tackle those payments head-on!