During the COVID-19 pandemic, the government pushed the pause button on federal student loan payments, interest and collection. But that policy was set to end May 1, and loan holders and consumer advocate groups were concerned that the government would seize portions of Social Security benefits and even tax refunds to satisfy defaulted student loans.
But there is good news. Borrowers have been granted a reprieve—at least for a while. The U.S. Department of Education has put a hold on collecting delinquent student loan debt until November, six months after the end of the COVID-19 payment pause.
According to the agency’s website, “This policy means you won’t lose money from certain government payments, such as the child tax credit, Social Security payments, and tax refunds for the 2022 tax season.”
Because of the pandemic, federal student loans have been on hold since March 2020. In addition to getting a break from collections, most loan holders haven’t had to make loan payments, and their accounts did not accumulate interest during this pause.
So what should you do if you have a federal student loan and you can’t afford the loan payments? Many options are available to help you out. Your best course of action is to reach out to your student loan servicer (the government-hired organization which collects and manages your payments) by phone or online.
Your loan servicer should be able to help you select your best option. If you are unsure who your servicer is, go to StudentAid.gov. Find your account dashboard and navigate to the “My Loan Servicers” section. You can also call the Federal Student Aid Information Center at 1-800-433-3243.
By law, the government can withhold up to 15% of Social Security payments to satisfy debts associated with federal student loans, child support, unemployment insurance and state income taxes. They can also take 100% of federal tax refunds and withhold up to 65% of federal salaries.
An estimated 9 million Americans have federal student loans in default, which means they’ve fallen at least 270 days behind on loan payments.