us department of education defaulted student loans

But many are borrowers of limited means who ended up in default unnecessarily, after Navient and the DOE’s other servicers steered them away from affordable repayment plans and into options that reduce the servicers’ costs, according to state and federal investigators and regulators, consumer advocates and a growing number of lawsuits and complaints filed against loan servicers. Some of these debtors are deadbeats, of course, unwilling to make payments they can afford. Today, 11 percent of the $1.325 trillion of federal student loans outstanding is severely delinquent or in default, higher than the mortgage default rate at the peak of the foreclosure crisis in 2010, according to data from the Federal Reserve Bank of New York. It’s a situation Johnson shares with many of the 8 million borrowers in the United States who are in default on a combined $137.4 billion in government-held or government-backed student loans.Ī student loan borrower talks about the impact of the Education Department’s tough debt-collection tactics. “I didn’t think it was going to double up or stack up, or cause me to lose the money I had worked for this whole time,” she says.

Most of these plans allow for monthly payments as low as zero and forgive any remaining debt after 20 years. Until contacted by Reuters, Johnson didn’t realize that she could have avoided the entire ordeal by enrolling in one of the government’s income-based repayment plans - an option she said Navient never discussed with her. And she was now in default, prompting the DOE to move to collect. She was learning only now that those plans, while allowing her to stall payments, didn’t stop her debt from ballooning as interest and fees piled up. 4, 2011, email, for example, stated: “You may be able to qualify for a deferment or forbearance, which can postpone your loan payments and keep your loan from going into default.” Whenever she fell behind on her payments, she would be enrolled in one of the forbearance plans promoted in a continuous stream of emails she received from Navient Corp, the largest loan servicer working under contract for the DOE. The two student loans she took out in 2006 in hopes of becoming a medical assistant amounted to only $6,625. It would probably do the same next year, the agent told her, to recover the rest of the nearly $17,000 she owed. On the phone, an Internal Revenue Service agent told her the Department of Education (DOE) was “holding back” the $8,220 refund to recoup some of her student loan debt. In past years, that’s when she received her federal Earned Income Credit tax refund. With the $13 an hour she earns caring for her elderly charges, Johnson planned to stay at the shelter - or with anyone who would let the two sleep on a floor, a couch or a spare mattress - until April. The girl was petrified that a classmate would see her using the secured entrance of the crowded, noisy shelter. Soon, they were living on a bunk bed in the shelter a few blocks from Aijiah’s school. Johnson, a home health aide, and 12-year-old Aijiah were forced to move out of their West Philadelphia apartment just before Thanksgiving last year, after the landlord jacked up the rent from $675 to $875. PHILADELPHIA – Lakisha Johnson figured all she needed was her 2016 tax refund to get her and her daughter out of a homeless shelter and back into a place of their own.

Us department of education defaulted student loans