3 big reasons to worry as the government starts collecting defaulted student loans

Borrower advocates are warning about the potential for confusion and chaos as the Department of Education prepares to start forcibly collecting on defaulted student loans for the first time in five years.

Secretary of Education Linda McMahon announced this week that the agency would resume mandatory collections next month, ending a pause that’s been in place since the beginning of the pandemic. In doing so, the government will be dusting off vast legal powers to recoup unpaid education debts that include the ability to garnish wages and withhold tax refunds as well as Social Security checks.

While many outside experts have acknowledged that the collections process needed to resume at some point, they’ve warned that recent upheaval within the Education Department and student lending program could end up creating new problems for borrowers, many of whom may not realize they still owe their debts after years of not having to pay them.

There are currently more than 5 million borrowers with loans in default, who will be immediately affected by the restart. Millions more Americans are expected to fall deeply past due on their student debts in the coming months, with a large bulge in the fall.

https://finance.yahoo.com/news/3-big-reasons-to-worry-as-the-government-starts-collecting-defaulted-student-loans-132631069.html