December 7, 2023
Not paying loans can start a domino effect of borrowers not being able to access other opportunities.
If you’re one of the millions of people skipping out on their monthly student loan payments, you may want to reconsider.
With student loan payments ramping back up in October 2023, several borrowers still struggle to make payments or overlook it altogether, which can have grave consequences, CNET reports. Not paying loans can start a domino effect of borrowers not being able to access other opportunities. At the bare minimum, allowing the loans to become delinquent can affect a credit score. Student loan payments aren’t like other household bills, where some may give a short grace period to submit a payment. If a borrower misses a payment on a specific date, the loan becomes delinquent the next day after the due date.
To default on a loan means the borrower has failed to pay the agreed-upon loan. The loan servicer has likely made several attempts to communicate with you before default occurs. Things can get worse if loans continue to stay in default. On top of credit scores taking a serious hit, the federal government can potentially seize a borrower’s tax return or garnish wages — something no one wants — to assist with paying off the loan.
Some borrowers can’t afford to pay their loans back. But if you fall in that category, the loan service may have options for you to make things easier, like forbearance or deferment. These options allow a borrower to postpone payment temporarily or reduce the amount they pay each month. The difference between the two is deferment doesn’t allow interest to accrue to most loans, while forbearance does.
The Biden administration is working with borrowers facing a repayment crisis. According to CNN, on Dec. 6, the Department of Education announced the approval of the cancellation of close to $5 billion in federal student loan debt. While the Supreme Court shut down Biden’s student loan forgiveness program, his administration promised to find a way around it.
“We are continuing to pursue an alternative path to deliver student debt relief to as many borrowers as possible as quickly as possible,” Biden said in a statement.
This new approval increases student debt relief to $132 billion for nearly four million borrowers.
RELATED CONTENT: President Biden Personally Addresses Student Loan Borrowers As Debt Relief Soars
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