Resumption of Student Loan Collections Raises Economic Concerns
The U.S. is set to resume collections on defaulted student loans, impacting millions and risking economic slowdown, experts warn.
The student loan portfolio is nearly $1.6 trillion, Leavitt said, with fewer than four out of ten borrowers up to speed with their loans.
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The timing of this debt collection plan is something to watch in the months ahead.
Trump administration to restart debt collections for student loan borrowers in default
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The Trump administration’s plan to begin collecting defaulted college loan payments from millions of borrowers risks contributing to an economic slowdown at a time when the U.S. faces an elevated risk of a recession, some experts told ABC News.
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Borrowers have been in limbo over the last few months amid litigation pausing the SAVE plan, a highly popular repayment program that was touted as the “most affordable” option for many.
Defaulted Student Loan Payments Will Start Soon. Here's What to Know
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Referrals for collection had been put on hold since March 2020 because of the COVID-19 pandemic, when the U.S. government also paused federal student loan payments and interest accrual as a temporary relief measure.
Student loans in default will be sent for collection. Here’s what to know for borrowers
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Only 38% of borrowers are in repayment and up to date on paying off their loans.
Trump administration to resume collecting defaulted student loans May 5
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Despite the downsizing, McMahon said, the department remains committed to assisting struggling borrowers.
Federal Student Loan Collections to Restart in May After Biden-Era Freeze
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This could not have come at a worst time for millions of Americans.
Trump Administration to resume collections on student loan borrowers in default
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More than 5 million borrowers are in default and 4 million more could be in the same position in a few months, which would put nearly a quarter of the federal student loan portfolio in default, according to the Education Department.
Student loan borrowers in default face garnished wages, Education Department says
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The Department of Education paused payments on student loans beginning in March 2020, amid the pandemic.
Student Loans in Default Will Be Sent to Collections Starting May 5, Department of Education Says
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The Biden administration misled borrowers into thinking it had constitutional authority to wipe debt away, Secretary of Education Linda McMahon said.
Education Department to restart collections of defaulted student loans
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The move comes as the Trump administration works to dismantle the Education Department.
Education Department to resume collecting student loans in default | Politics
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The change, which McMahon unveiled on April 21 and has been expected for months, represents the last major cog in the wheel of the U.S. student loan repayment system to start spinning again since the coronavirus pandemic.
Collection of defaulted student loans to restart May 5 for first time since pandemic
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Currently, roughly 5.3 million borrowers are in default on their federal student loans.
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Student loans in default to be referred to debt collection, Education Department says
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Student Loans in Default Going to Debt Collection in May
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Summary
Starting May 5, the U.S. Department of Education will resume collections on defaulted federal student loans, affecting 5.3 million Americans. This decision raises economic concerns as experts warn it could contribute to an economic slowdown, particularly given the precarious economic situation. While the Trump administration emphasizes borrower responsibility and asserts taxpayers shouldn't bear the burden, economists indicate that wage garnishments and reduced consumer spending could exacerbate pressures on the economy. Additionally, almost 4 million borrowers are in late-stage delinquency, increasing potential defaults. Secretary Linda McMahon highlighted that assistance will be available, but borrowers are urged to act swiftly.
Perspectives
Trumpepartment of Education is set to resume collections on federal student loans, ending a pause that began in March 2020 due to the pandemic, as a response to growing defaults among borrowers.
Education Secretary Linda McMahon stated that borrowers must take responsibility for their loans as taxpayer relief is no longer feasible, especially as current repayment rates are alarmingly low with only about 40% of borrowers in repayment.
Advocates for borrowers criticize the resumption of collections, arguing it could exacerbate economic hardship for families and highlight the need for more sustainable repayment solutions.
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