Millions of student borrowers risk losing part of their salary

• About 3 million borrowers could default.
• The government has the right to withhold up to 15% of salaries for loan repayment.
• Borrowers can submit a request for a hearing to contest the withholding.

According to the credit bureau TransUnion, millions of student borrowers may start losing part of their salaries this summer. In September, nearly 3 million borrowers could fall into default, which means they have not paid their loans for more than 270 days. In such a case, the government has the right to withhold up to 15% of their salary for loan repayment.

After the pause on loan payments, which lasted during the pandemic, borrowers are forced to reassess their financial options. Another 2 million borrowers could default in September. The government's program, which did not take into account overdue payments for student loans, ended last fall.

Now it is important for borrowers to check the status of their loans at studentaid.gov and take steps to avoid default. Borrowers can enter into a rehabilitation agreement or consolidate their loans into a new federal loan.

The Department of Education warns that tax refunds and salaries may be withheld if borrowers do not start making payments. For example, Richelle Brooks, an education administrator from Los Angeles, received a warning about the necessity to pay back $239,000 in loans, which is approximately $3,000 monthly.

Borrowers can use the steps if they receive a notice about the loan withholding. The Department of Education is required to give 30 days' notice to submit a request for a hearing to contest the withholding. In the case of being laid off from previous employment, it is also possible to contest the withholding if you do not work for a new company for 12 months.

Tags: USA/Economy