Student loan repayment 'on-ramp' ends September 30 [2024]
By: Medora Lee
USA Today
..... Time's nearly up for student loan borrowers to start repaying or else face credit score consequences soon.
.....
"To protect the most vulnerable borrowers," President Joe Biden last year [2023] offered a 12-month "on-ramp" to repayment " so that financially vulnerable borrowers who miss monthly payments during this period are not considered delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies."
..... That on-ramp is set to expire September 30 [2024] and anyone who doesn't begin making payments in October [2024] risk a hit to their credit score.
..... Good credit scores are vital because they determine whether you can get a loan and what you'll pay in interest for that loan. They're also used to determine many other things in your life. For example, insures might use credit scores to set your premiums, landlords might use them to decide if they'll rent to you, and banks can look at them to determine what sort of credit card you can get and on what terms.
When would credit scores drop?
..... If no payment is received within 90 days, the account will be considered seriously delinquent and reported to the credit bureaus.
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"It shows up when the payment's 90 days past due," said Liz Pagel, consumer lending leader at credit reporting agency TransUnion. "If you don't pay in October, November and December, [2024] in January, [2025] you'll see that October payment past due. So then is when it'll impact your credit report."
..... Borrowers need to start making payments in October [2024] to avoid any hit to their credit score, Pagal said.
What if borrowers can't pay?
..... The worst thing to do is ignore the payment, said Jared Chase, director of M&A and financial adviser at Signature Estate & Investment Advisors.
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For some borrowers, finding a new, more affordable government payment plan may be difficult right now. New applications for Biden's new income-driven repayment programs that offer lower monthly payments are currently paused with Biden's Saving on a Valuable Education plan mired in the courts.
..... One program that's still available is Fresh Start, but only through September 30, [2024] so borrowers must hurry and contact their loan servicer. Fresh Start allows people with defaulted federal student loans to get out of default.
Other reasons you need to pay
..... Aside from damage to your credit score, which can las up to seven years, there are other reasons to make sure you make your student loan payments. If your student debt defaults," according to Federal Student Aid:
* The entire balance of the loan (principal and interest) becomes immediately due.
* The government can collect your debt by withholding your federal and state income tax refunds and other federal payments.
( Previously, the government could also garnish your wages, but that has been canceled.