Journalist Jillian Berman shares what the student loan pause being over means and how to get your payments back on track.
Last week, the Trump administration officially restarted collections on defaulted federal student loans, marking the end of a five-year student loan pause that started back in his first term. During the pause, borrowers weren’t penalized for falling behind on repayment. Now, the administration is saying it’s time to pay up.
And if you don’t? You could see your wages garnished, your Social Security payments reduced, and yes — even your credit score take a hit.
This all comes at a time when we’re all feeling worried about the economy and bracing ourselves for a possible recession. And all of this flip-flopping on student loan repayment has made people wonder: Is this really happening? Or will the Trump administration walk back on repayment again?
On the HerMoney podcast this week, Jean Chatzky sits down with Jillian Berman, student loans expert and author of the new book: “Sunk Cost: Who’s to Blame for the Nation’s Broken Student Loan System and How to Fix It.” She takes us behind the headlines, breaks down who is most at risk, and how to get your payments back on track if you’re in default.
In Default, Delinquent, In Forbearance… What’s the Difference?
Jean Chatzky: How do you know where you stand now that the student loan pause is over? How do you check the status of your student loans? What’s the difference between being current and forbearance, delinquent, or in default?
Jillian Berman: The best way to check on your federal student loan status is to log onto studentaid.gov. If you sign in there, if you’re in default, it should be pretty clear to you. Default means you have not made a payment that you owed for more than nine months, and that’s the status that’s facing these really harsh consequences.
Delinquency means you’ve fallen behind and you’re about three months behind on payments, but you haven’t yet hit that nine-month window. And for delinquency, you will see credit score consequences. So, if your credit score takes a hit, that’s a signal that it’s because of your student loans, and you need to address them.
Forbearance is a temporary pause in payments that your servicer will put you in. What we’re seeing right now is that there are a lot of borrowers in forbearance because there’s litigation surrounding student loan repayment plans. So about 8 million borrowers are in a kind of forced forbearance, and they’ve been in it for months. Forbearance is supposed to protect you against the consequences of delinquency and default.
Why Older Borrowers Are Struggling Too
Jean Chatzky: In the book, you write about the fact that a huge portion, 20% of student debt, is held by borrowers over the age of 50, and people over 60 are the fastest growing population of student debt holders by age. What’s up with this?
Jillian Berman: Some of them are Parent PLUS loans, which are federal loans that parents take on to help their kids pay for college. But there are a couple of other factors going on. One is that people are going back to school later in life to retool, and so the debt sticks around into retirement.
And then the other thing is, in these income-driven repayment programs, the maximum repayment term is 25 years. But for a long time, there was evidence that a lot of people were paying beyond those 25 years, and the programs weren’t really working as intended. And I’ve spoken to borrowers who have struggled to access the benefits of a student loan program that could help them get rid of it more quickly.
Worried About the Student Loan Pause Being Over? Here’s What You Can Do Now
Jean Chatzky: If you go online and you see you’re either in default or maybe you are delinquent, what’s the next step? How do you write that ship?
Jillian Berman: Yeah, so if you’re in default, for most people, the best next step is to contact the Default Resolution Group. That’s a group at the Department of Education that will help you get into the different programs that can cure your default.
And there are two ways that people typically do it. One is called a rehabilitation. One is called a consolidation. It’s possible that we’ll see some long call wait times, but get on the phone and do what you can to get out of default. If you’re delinquent, or you know you’re behind, but you’re not yet in default, that’s when you should call your student loan servicer and try to get into an affordable repayment plan. For most people, that’s going to be something called income-driven repayment. But there are other options that could help.
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MORE ON HERMONEY:
- 5 Things Borrowers Should Know When Student Loan Payments Resume
- What It Takes To Pay Off $20,000 In Student Loan Debt In One Year
- How Is Your Credit Score Calculated?
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