MILLIONS of Americans must watch out for a looming payment deadline this summer.
Missing it could result in serious penalties, and many still owe tens of thousands of dollars.
GettyMillions of Americans still owe money to the federal government (stock image)[/caption] GettyThe outstanding student loan debt in America is nearly $2 trillion (stock image)[/caption]As of March, the total student loan debt in the United States was $1.777 trillion, according to findings from the Education Data Initiative.
Federal student loan debt accounts for 92.2% of all student loan debt, with an average balance of $38,375 per person.
Repayments have gone through pauses since the height of the coronavirus pandemic in 2020, allowing for some financial breathing room during difficult times and high inflation.
Except, as of an on-ramp period that ended on September 30, 2024, the outstanding funds are owed on a consistent basis once again.
Those who still haven’t made payments after 270 days on their federal student loans will automatically default.
June 27, 2025, is exactly 270 days from the on-ramp period.
Defaulting on student loans is serious, as it can reduce an American’s wage, significantly damage their credit, and make them lose access to other affordable repayment plans.
Around 5.6 million Americans are between 91 or 180 days behind on their federal student loan payments, per United States Department of Education findings.
Most are borrowers who were doing just fine pre-pandemic but haven’t been paying consistently since loans resumed.
As of May, at least five million people were already defaulted on student loans because they didn’t make payments pre-pandemic.
That means, according to the Department of Education, well-over 10 million borrowers could be in default on federal student loans this summer, or about one in four.
Fortunately for many, there’s still time left to make payments or get assistance to get on track.
SERVICER VERIFICATION
Sometimes it’s possible to lower monthly payouts drastically or get a continued pause in a difficult financial situation.
First, Americans must check all of their current student loan accounts to confirm dates and avoid defaulting.
Student Loan Statistics
Student loan debt in the US is over $1.777 trillion Federal student loan debt accounts for 92.2% Average federal student loan debt amount per person is $38,375 Students at a public university borrow $31,960 on average to attain a bachelor’s degreeCredit: Education Data Initiative
Federal student loan accounts are often through StudentAid.gov, and logging in can detail the loan’s history and the name of the servicer of the loan, which could’ve changed.
Once borrowers have identified the loan servicer/s and log into accounts, they can get all information needed.
Additionally, those nearing default should have already gotten several calls from those servicers about making payments, according to what Scott Buchanan, executive director of the Student Loan Servicing Alliance, told NewsNation.
REPAYMENT OPTIONS
From there, borrowers could choose from a few different income-driven repayment (IDR) plans: Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Income-Contingent Repayment (ICR).
IBR caps monthly payments at a certain percentage of their current income to make it more manageable.
That means the bill could be $0 for those who are unemployed or earn a very low income.
All IDR plans have varying eligibility rules and terms, but for many, these are still the best path forward to start, according to Taylor.
Applications for IDR plans may take some time, however, as there’s a backlog of around 2 million, per a May court filing.
Those who were already on a Saving on a Valuable Education (SAVE) IDR repayment plan since last summer haven’t had to make payments.
There’s an ongoing interest-free forbearance in place during legal proceedings with SAVE.
CALL IN
Other avenues include consolidating loans through a separate servicer to extend a payment period and reduce monthly bills.
Calling a servicer and explaining a situation like housing costs, medical debt, child care, or other extenuating circumstances could also earn a forbearance or deferment on the loan.
While interest will likely still accrue on the outstanding amount, it avoids default and offers “the borrower some time to rework their budget, to try to start making payments again in the interim, and to work to get over whatever has created a hardship for them,” per Taylor.
College students can also get a chunk of a $17 million settlement soon if they were affected by the pandemic.
A couple also managed to pay off $190,000 in student loan debt in just 27 months with a crucial method.
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