![]() Around day 330 to 360 of missing a payment, your loan goes into collections, says Betsy Mayotte, president and founder of The Institute of Student Loan Advisors. Refinance My Student Loan How borrowers enter defaultīorrowers enter default when they miss at least 270 days of payments on their student loans. "Default has really grave consequences for borrowers and their families," she adds. Getting out of default can be the difference between someone being able to pay rent or buy diapers for their kids and not being able to do any of that, Shafroth says. And it can do this forever there is no statute of limitations on collections during the borrower's lifetime. Without ever going to court, the government can seizes wages, Social Security benefits, and tax refunds and credits. The consequences of default are pretty draconian for borrowers, says Persis Yu, policy director and managing counsel at the Student Borrower Protection Center. "At this point, I feel like forgiveness is my only shot at getting out from under this," she says. But the consequences of her default still follow her: The background check for her current job took more than a year, and she had to provide documentation that she was making her payments on time. Now in her mid-thirties and working a government job, Lindsey has been out of default since 2018 after setting up a payment plan. She was ashamed, too, and afraid of what she'd find out about how much she owed. "I had no idea what was going on and I wasn't in a place where I could track them down," Lindsey says. But by the time she got sober, she didn't even know who held her loans or where they were - let alone how to pay them off. (Money is only identifying Lindsey by her first name at her request, as she doesn't want her employer to know the details of her default and personal finances.) She requested forbearance, which allows a borrower to suspend payments for a set period of time, when she lost her job. Lindsey defaulted on her student loans in 2014 after her father's death spurred an onset of depression and drinking. Hawaii Alaska Florida South Carolina Georgia Alabama North Carolina Tennessee RI Rhode Island CT Connecticut MA Massachusetts Maine NH New Hampshire VT Vermont New York NJ New Jersey DE Delaware MD Maryland West Virginia Ohio Michigan Arizona Nevada Utah Colorado New Mexico South Dakota Iowa Indiana Illinois Minnesota Wisconsin Missouri Louisiana Virginia DC Washington DC Idaho California North Dakota Washington Oregon Montana Wyoming Nebraska Kansas Oklahoma Pennsylvania Kentucky Mississippi Arkansas Texas View Rates Default has 'grave consequences' "This one-by-one approach of putting it all on borrowers who are in difficult financial circumstances to figure it out themselves has demonstrably not worked," says Abby Shafroth, a staff attorney at the National Consumer Law Center. In addition to borrowers being unaware of the opportunity, advocates says the process is onerous for people already in extremely precarious financial situations. But the latest data from the Department of Education shows that of 7.7 million borrowers with federally held loans who were in default when the pandemic started, more than 92% are still in default. ![]() The problem? They didn't know about.Ī little-known provision in the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act passed in March 2020 could have helped many borrowers exit default completely. Yet during the pandemic, borrowers in default had a unique opportunity to escape their predicament. Defaulting can have long-lasting consequences, including hurting borrowers' credit scores and depleting other sources of income through government collections. ![]() ![]() Unfortunately, she isn't alone: Millions of borrowers are in default on their student loans, meaning they didn't make payments on their loans for at least 9 months. She's had to decide whether to to buy medication, and how much food she can afford, since the government has taken some of her Social Security payments through collections. Gary, who was born in Guyana in South America but has lived much of her life in the Bronx, New York, says being in default has affected all aspects of her life. "It's a debt that seems never to go away," says Gary, now 73. Over 30 years later, Gary has paid over $22,000 toward the loans, which she defaulted on in the 1990s. In the late 1980s, Patricia Gary borrowed $6,600 worth of federal student loans to pay her way through beauty school, a move she thought necessary as computers began to replace typewriters and her job skills didn't translate.
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