Now, more than three years later, Perez got her money back. "That situation was really bad for me," she recalled. "I had to go to some people looking for help for food." Perez, who lives in Brooklyn, N.Y., added that she was also in touch with food pantries to try and find sustenance. "I did something that I could have never done, asked for my children's father to help me out with them," she said. Perez, 50, resorted to extreme measures to ensure her family stayed fed and housed. Shortly after the funds were taken, she lost her job working in food service due to the pandemic-era restrictions. "I was expecting for that money to take care of my family," she said recently. Perez was relying on the money to cover basic necessities for herself and her two children.īut in February 2020, just weeks before the world and economy shut down due to COVID, the funds were taken by the government to repay student loans she had previously defaulted on. In early 2020, Mary Perez was expecting $6,516 in tax refunds to help with her bills. However, once you meet the nine-payment requirement, your loans will be out of default, and all collections and Treasury offset withholdings cease.As part of a settlement, the government plans to overhaul the notice it sends borrowers who are at risk of having tax refunds or Social Security checks taken over defaulted student loans Also, collections payments won’t count toward your nine-payment requirement. It’s important to note that the nine-month process doesn’t stop collections activity or Treasury offset withholdings from benefits like Social Security. Those with Perkins loans can rehabilitate an account by making a full monthly payment within 20 days of the due date for nine consecutive months, and the loan holder will determine the required monthly payment. The Department of Education, or a different loan holder if you have FFEL loans, considers a "reasonable amount" to be 15% of your annual discretionary income divided by 12. For those with direct loans or older Federal Family Education Loans, rehabilitation involves making nine consecutive payments of a reasonable amount within 20 days of the due date – and within a 10-month period. It’s important to speak with potential consolidation lenders to get the details before you take out the loan. However, the most important thing to remember about a consolidation path is that consolidating could impact your eligibility for loan cancellation programs. Consolidation loans can either be federal or private, and each has its pros and cons. A consolidation loan pays off your defaulted student loan debt and refinances some or all of your eligible student loans into a new loan. Mandatory forbearances are for periods of up to 12 months and can be renewed if you continue to qualify. It's also available for up to three years to borrowers who owe 20% or more of their monthly gross income. Mandatory forbearance is available to eligible teachers and those in certain public service or defense roles or medical internships or residencies. General forbearances – those granted at the discretion of your loan servicer for financial hardship – can last for up 12 months at a time, with a cumulative limit of three years. If you let interest accrue and capitalize, your loan balance will increase. Forbearance is also a temporary suspension of payment, but you remain responsible for making interest payments.The Department of Education suggests exploring an IDR plan instead of deferring, as you can still make affordable payments (potentially $0 per month) and your loan still qualifies for forgiveness down the line. Deferment is a temporary suspension of payments on your loan, but interest will continue to accrue.Current IDR plan options give borrowers a range of ways to make their student loan payments in their budget, says Brian Walsh, a certified financial planner and senior manager of financial planning at SoFi, a private student loan lender and personal finance company. If you aren’t sure which plan is right for you, you can use the government’s loan simulator to see which one best suits your goals. Payment plans, including cost-saving income-driven repayment plans, or IDR plans, can help make your student loan payments budget friendly.
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