The U.S. Department of Education (DOE) announced that its Office of Federal Student Aid (FSA) resumed collection of its defaulted federal student loan portfolio on May 5.
The department has not collected on defaulted loans since March 2020.
‘Collections on defaulted federal student loans are resuming. This means that your tax refund or other federal benefits may be withheld,” reads an email affected borrowers in California and around the country received from the DOE last week.
“Later this summer, your employer may also be required to withhold a portion of your pay until you begin to repay your defaulted federal student loan,” the email continues.
According to the DOE, 42.7 million borrowers owe more than $1.6 trillion in student debt. More than 5 million borrowers have not made a monthly payment in over 360 days and their loans have been declared “in default.” Another 4 million borrowers are in late-stage delinquency (91-180 days). As a result, there could be almost 10 million borrowers in default in a few months. If this happens, almost 25 percent of the federal student loan portfolio will be in default.
“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” said U.S. Secretary of Education Linda McMahon in a release. “The
Biden Administration misled borrowers: the executive branch does not have the constitutional authority to wipe debt away, nor do the loan balances simply disappear. Hundreds of billions have already been transferred to taxpayers. Going forward, the Department of Education, in conjunction with the Department of Treasury, will shepherd the student loan program responsibly and according to the law, which means helping borrowers return to repayment — both for the sake of their own financial health and our nation’s economic outlook.”
The DOE is urging borrowers in default to contact the Default Resolution Group to make a monthly payment, enroll in an income-driven repayment plan, or sign up for loan rehabilitation. Later this summer, FSA will send required notices to begin administrative wage garnishment.
Student loan debt statistics among racial and ethnic groups reflect dramatic differences in financial health, habits, and resource availability from one community to the next, according to the Education Data Initiative.
Black and African American college graduates owe an average of $25,000 more in student loan debt than White college graduates (Black and African American bachelor’s degree holders have an average of $52,726 in student loan debt).
Four years after graduation, Black students owe an average of 188 percent more than White students originally borrowed. Black and African American student borrowers are the most likely to struggle financially due to student loan debt making monthly payments of $258. To continue reading plase visit www.cablackmedia.org.
