If you’re still paying student loans and also hold credit card debt, now is the time to get a plan in place for repayment, especially if you’re struggling. That’s because anyone who defaults on student loans will soon be subject to potential wage garnishment, while a pause on collections that’s been in place since the pandemic is ending.
When garnishment resumes, anyone who defaults may have their wages garnished up to 15%. Not paying your regular monthly payment means your credit score will also be negatively impacted. A credit counseling agency can help you create a budget and offer resources that can help. One such resource is a program called a debt management plan (DMP).
If you enroll in a DMP, a certified credit counselor will work with your lenders to consolidate your credit card debt into one monthly payment and reduce your interest rate. The plan is designed so you can pay it back in three to five years. While a DMP doesn’t include student loans, you won’t be paying as much on your credit cards, helping to ensure you have more in your budget for student loan repayment.
If you default on a student loan, you’ll receive a 30-day wage garnishment notice. However, you can negate the action by paying off your balance, renegotiating repayment terms, or requesting a hearing. If you have concerns, talk to a credit counselor and see if they can help you determine the best option.