The government will restart collection of defaulted student loan payments Monday.
The move ends a nearly five-year-long pause on payments for 5 million Americans that started during the COVID-19 pandemic.
The Department of Education is urging borrowers who defaulted on their loans to start making monthly payments or sign up for a loan program; if not, their wages could be garnished.
“If your debt gets sent to collections, that goes onto your credit report, and that can impact your ability to get an apartment, a mortgage, a car loan. Even some employers check,” said Jessica Roy, a personal finance columnist at The San Francisco Chronicle.
Defaulting usually means missing payments for 270 days or more.
The Department of Education estimates about 5 million borrowers have defaulted on student loans. It says another 4 million are at least 90 days late on payments.
Experts suggest all borrowers visit their loan provider’s website to confirm their status and update their contact information.
If a person is worried about defaulting, experts say they could look into an income-based repayment plan, payment pauses called deferment or forbearance, or consolidation or refinancing.
The DOE says a person with a defaulted loan can learn their options through the student aid office’s default resolution group. They might be able to restore their status through a process called rehabilitation.
“It’s time to, you know, buckle down and figure out how you can make those payments,” Roy said.
Experts urge people to be careful and to watch out for student loan-related scams.
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