Student borrowers beware: Donald Trump says default could cost you your social security and tax refunds, no exceptions

Beginning from May 5, defaulters of student loans will be subject to some of the toughest punishments so far, as the Trump administration resumes collections, as per a report. The US Department of Education will resume the policy of withholding tax refunds and Social Security benefits to pay back defaulted student loans, a step which has the possibility of affecting millions of borrowers, according to Market Watch.

Tax Refunds, Social Security Payments on the Line

After a five-year pause because of the pandemic-era freeze on student-loan payments, this is the first time that many will feel the full brunt of such collection tactics, as per the report. Defaulting on a student loan constitutes falling behind on payments for more than 270 days, and with almost 10 million borrowers at risk of having their credit score harmed, the government indicates that it is necessary to begin collecting again to protect taxpayers, as per Market Watch.

A senior Education Department official said, “The current administration believes that the American taxpayers can no longer serve as collateral for student loans", adding that, "Student-loan debt must be paid back,” as quoted in the report.


The Education Department intends to start garnishing wages in the next few months for those who default student loans, in addition to offsetting tax refunds and Social Security benefits, according to Market Watch.

Borrowers Will Be Contacted With Help Options

The official mentioned that, the department would reach out to borrowers to help them understand their options, as per the report. Defaulters would have a choice to make their loans current to avoid the harsh consequences, according to Market Watch. While, they can also rehabilitate their loans and make a series of affordable payments to cure their default, or they can consolidate out of default and enter into an income-driven repayment plan, reported Market Watch.

FAQs

What happens if I’m in default?
The government can take your tax refunds, Social Security payments, and soon even part of your paycheck.

Will I get a warning first?
Yes, the Department of Education says they’ll reach out to help you understand your options.