Carolina Rodriguez, Director of the Education Debt Consumer Assistance Program at the Community Service Society of New York, emphasizes that anyone temporarily unemployed should be able to qualify for a $0 payment plan. And many others qualify based on income and family size.
Abby Shafroth, senior attorney and director of the Student Loan Borrower Assistance Project at the National Consumer Law Center, said that, of the two, deferment is generally a better option. "That doesn’t mean people shouldn’t look into it," Rodriguez said. “But they may not be successful at discharging their loans.”
Shafroth, of the NCLC, says that new guidance on student loan bankruptcy has been coming out in recent years. Once a loan is in default, it’s subject to the collection processes mentioned above. That means the government can garnish wages to go towards paying back the loan, intercept tax refunds, and seize portions of Social Security checks and other benefit payments.Shafroth said that many borrowers may still be eligible to have loans canceled via a patchwork of programs outside of the Biden administration's proposed debt relief program.
Borrowers who were in default will not be subject to collection processes or have wages garnished through about August 2024, or roughly one year after the payment freeze ends. These borrowers have also been granted permission to apply for federal student loans again, to complete degrees. Lastly, these defaulted loans are now being reported to credit bureaus as current.