SALT LAKE CITY — An announcement from the Trump administration this week is putting about 5 million Americans on a very short timeline. The U.S. Department of Education announced it will resume collections on defaulted loans beginning on May 5 for the first time since 2020.
Utah has 325,000 student loan borrowers, and in total, they owe approximately $11 billion, with the average borrower in the Beehive State owing around $38,000.
Here’s how you can get your loans back on track before they start up again if you are delinquent or in default on your student loans.
For those who have not consolidated federal student loans into one loan, it's the first thing you should do if you're like most borrowers who have two to four loans.
If that's done, but you haven't signed up for income-driven repayment plans, CLICK HERE and check out the payment calculator and find a repayment plan that works for you. Click on loan repayment, find "Tools and Calculators" then hit "Loan Simulator." Once you find a plan, sign up on the website.
If you're in default, there are other steps you need to take. Find the default resolution group on the Department of Education's website and click "I have defaulted loans." There, you'll find a rehabilitation program for borrowers with defaulted loans.
If you make nine on-time payments, the department will consider you current, and you might be eligible for a Pell Grant or other types of financial aid should you need it.
Government and lender relations expert Jack Wallace with Yrefy, an educational consulting company, says if you're trying to work your way around student loans, here's what you don’t want to do.
"Two things that have come up in the last couple of days as I talk to borrowers and parents around the country is, ‘I'm going to declare bankruptcy.’ Here's a newsflash: federal student loans, private student loans are not dischargeable in bankruptcy, so you get rid of all your other consumer debt, but the student loans are still going to be there,” explained Wallace. “I've had parents say to me, ‘I'm going to do a debt settlement program.' You have better options with the Department of Education than with debt settlement."
The Department of Education announced it is reinstituting the TOPS program, which was suspended during the pandemic. That means a tax refund can be taken and applied to a loan, or if you're on social security or working full or part time, your wages can be garnished up to 15 percent.
Borrowers should also consider enrolling in autopay to keep from going delinquent.
