Credit: Envato Elements
A practical guide to managing student loans, avoiding default, and finding repayment solutions that work for you
After a long pause in federal student loan repayments, millions of borrowers are now re-entering repayment—some for the first time in years. While the thought of starting up payments again might feel overwhelming, the good news is there are multiple options available to help borrowers avoid default and manage their debt more effectively.
Understand Where You Stand
If you haven’t made a student loan payment in the past five years, it’s time to check your loan status. Begin by visiting StudentAid.gov to:
- Find out how much you owe
- Identify your loan servicer
- Explore available repayment options
Interest charges resumed in October 2023, so you may owe more than expected. But don’t panic—there are tools and repayment plans designed to help.
Explore Affordable Repayment Options
Income-driven repayment (IDR) plans are now more accessible than ever. These plans can reduce your monthly payments based on your income and family size, making repayment more manageable. Although the IDR application was briefly unavailable, it’s back online and ready for use.
To make the process easier, the U.S. Department of Education has introduced new tools like a Loan Simulator, an AI Assistant called Aidan, and extended support hours from loan servicers. These additions are designed to simplify repayment choices and enrollment processes.
Beware of Scams
The Education Department emphasizes that you should never pay for help with your student loans. If someone contacts you asking for enrollment, subscription, or maintenance fees to assist with your loans, it’s likely a scam. Legitimate help is available for free through your loan servicer or official resources.
What If You’re Already in Default?
If your loan is in default, immediate action is crucial. The government can begin administrative wage garnishment, taking up to 15% of your disposable income without needing to go to court. You’ll receive a certified letter before garnishment begins, giving you 30 days’ notice to respond.
To prevent wage garnishment and other forced collections, borrowers have two primary options:
- Loan Rehabilitation – Make nine out of ten consecutive, on-time, affordable payments.
- Loan Consolidation – Combine your defaulted loan into a new loan to bring it current.
While consolidation is faster, rehabilitation has the advantage of removing the default from your credit report.
Forced Collections Go Beyond Paychecks
If your loans remain in default, other forms of collection may follow, including:
- Federal tax refund seizure
- Social Security benefit offsets
(with $750/month protected) - Loss of eligibility for additional federal aid
Older borrowers, especially those on Social Security, face additional risks as many already live on fixed incomes. Wage or benefit garnishments can push them further below the poverty line.
How to Avoid Default in the First Place?
If you’re struggling but haven’t defaulted yet, don’t wait. Depending on your situation, you might qualify for:
- Deferment (for temporary financial hardship, unemployment, or medical reasons)
- Forbearance (short-term suspension of payments, though interest may accrue)
- Income-driven or extended repayment plans (to lower your monthly bill)
These options help you stay in good standing and avoid long-term consequences like damage to your credit or loss of federal aid eligibility.
Proactive Tips for Repayment Success
- Set up Autopay – This not only ensures on-time payments but may also qualify you for a small interest rate reduction.
- Reassess your repayment plan annually or when your income changes.
- Use the Loan Simulator on StudentAid.gov to find the best plan for your financial situation.
- Talk to your servicer or a nonprofit financial counselor like GreenPath Financial Wellness if you need help understanding your options.
Colleges Must Step Up
The Department of Education is now requiring federally funded colleges and universities to reach out to former students by June 30 to remind them about their repayment obligations. This move aims to ensure borrowers don’t miss critical updates that could impact their financial future.
Final Thought
Falling behind on student loans can be daunting, but avoiding action only makes the situation worse. Take time to understand your loan status, explore your repayment options, and ask for help if needed. With the right strategy, managing your student debt is entirely possible—and it starts with taking that first step today.
