INDIANAPOLIS — Starting May 5th the US Department of Education will start collecting on student loans that are in default.
“People need to look at their student loans. What do they have and then also really exam what are the pros and cons of the different types and then do the best thing for them," said Bill Wozniak, the vice president of INvestED.
INvestEDis a not-for-profit organization that helps people through financial aid before, during and after post secondary education. They talk to tens of thousands of people each year and have been helping people prepare for when they need to start repaying.
“Now we’re going to get that final clarity on here’s exactly what the options on, here’s the terms, here’s the conditions so people can make that informed decision,” said Wozniak.
Wozniak says there’s three groups of people, those who kept repaying, the 1.9 million who have been in limbo waiting for the terms of income based repayment, and those who missed payments. According to the U.S. Department of Education, about 25% of the federal student loan portfolio will be in default.
“There’s a number things they can run in to,” said Brad Clark the president of Solomon Financial.
Clark says defaulting on your student loans could negatively impact your credit score.
“Obviously it can cause problems with other potential financial opportunities whether that’s taking out a mortgage, car loan, credit cards, any number of things,” said Clark.
On top of that Clark says you could run into issues with getting a cell phone, insurance premiums, and tax refunds.
“Where it probably created the most problem for people is that they got used to not paying those loans and like so many Americans those dollars got allocated somewhere else and now how do we start marking that payment again?” said Clark.
