While a pause on collections helped people get through the pandemic, that pause is soon getting lifted. As wage garnishment is also set to resume for anyone who defaults on a student loan, carrying credit card debt can be an even bigger burden.
Getting your finances in order now can help you feel confident in your budget later, especially with high inflation and interest rates still putting a dent in consumer pockets. To avoid being penalized, a debt management plan (DMP) may be able to help ensure you have the income you need to pay toward your student loans.
First, you’ll want to make an appointment with a credit counselor. During your meeting, your counselor can help you budget and set financial goals. A DMP is a program offered by certified credit counselor agencies. When you enroll, a counselor will work with your lenders to consolidate your credit card debt into one monthly payment while reducing your interest rate.
Although you can’t pay off your student loans through a DMP, you’ll pay less on your credit cards over time, loosening up the budget so you can pay your student loans consistently.
Bottom Line
Knowing what to do if you default on a student loan can help you be prepared. Although paying off the loan completely will negate the action, most people can’t financially do that. However, you can try to renegotiate your loan terms or request a hearing. But if you need help, a debt management plan may be able to help.