Prepare to pay back those student loans, NJ, or face the consequences

💲 The student loan deferment program ends on May 5

💲 That means borrowers must begin paying back their loans

💲 If not, there will be stiff consequences

Things are about to get serious when it comes to paying back your student loans.

The deferment program started in March 2020, during the COVID-19 pandemic. For five years, student loan borrowers have been protected, for the most part, from the harshest consequences of not paying back their loans.

But all that comes to an end on May 5.

What does that mean?

That means it’s time to pay back those loans, or the feds could start taking drastic actions.

Collectors will begin contacting student loan borrowers through email, phone calls, or direct mail, looking for their money.

“So, don’t hide your head. Answer the emails. Respond to them. Get ready to make your payments so they don’t have to send you to collections because they are going to do that,” said Eric Stuerken, co-founder of the credit repair firm, Better Qualified, in West Long Branch.

He said if the Office of Federal Student Aid does send student loan borrowers to collections, they’re talking about garnishment of wages and tax refunds taken away. All of this can be avoided if everyone just communicates.

While enforcement begins on May 5, Stuerken said the feds are giving student loan borrowers 30 days to start communicating with them, again, through email, direct mail, or phone calls.

Currently, there are 5.6 million student loan borrowers in default at the end of 2024. That’s a lot of people, Stuerken said.

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“Out of those numbers, that means they are at least 270 days late. They haven’t been making their payments,” he said. The feds said they will begin taking money out of borrowers’ paychecks who have missed their payments for 270 days or more.

Four out of 10 student loans are considered “current.” But 35% of those current loans are 60 days or more late. That’s a lot of “lates,” Stuerken said, and now, you want to avoid hitting that 270-day late mark.

Almost 43 million borrowers owe more than $1.6 trillion in student loan debt, according to the U.S. Department of Education.

The FSA plans to launch an enhanced income-driven repayment process to simplify the time it takes borrowers to enroll in these plans, and eliminate the need for borrowers to recertify their income every year. More information can be found here.

What can student borrowers do?

Communication is key, here. Work out a plan. There will be several different plans with minimum payments to make, Stuerken said.

Just don’t let it go to collections. You don’t want this to show up on your credit report.
A student loan is considered an installment loan, which can be painful if you go late with payments. So, keep them current, Stuerken suggested.

“Start the communication process. Don’t hide your head in the sand. Pay attention. You know your payments are going to be somewhat what they were prior to (the deferment period), but they can negotiate. They can stretch them out. That’s what they’re looking to do. They’re not looking to just take money. They’re not looking to put people into collections because that’s not good for anybody,” Stuerken said.

It’s very important to set aside money each month to pay off these loans and keep them current, if you have not been doing so, Stuerken said. They are not going to go away.

Preserve Your Credit

It’s also crucial to preserve, as best you can, your credit rating. Not paying back student loans can damage your credit rating, which can then lead to higher lender interest and mortgage rates in the future, he added.

“We’ve gotten several calls of the last couple of weeks that people automatically thought they were in deferment. Some paperwork said that they were. There were some erroneous late payments showing up on some different credit reports based on certain student loans being serviced by some other companies,” Stuerken said.

So, if you have student loans, monitor your Social Security number and your ID because identity theft is a huge and fast-growing crime in America, he said.

“Make sure your credit score is not being affected. Pay attention to that number. It’s one of the most important numbers in your life,” Stuerken said.

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