Wage garnishment to begin for student loan borrowers in default, nearly half of Colorado students in debt
The U.S. Department of Education is sending notices to more than 5 million borrowers who are in student loan default as the Trump administration steps up enforcement.
For many colleges and universities in Colorado, student debt totals showed a slight decrease in 2023. According to the Colorado Department of Higher Education, students who earned bachelor's degrees in Colorado in 2023 owe an average of $24,361 in student loan debt. The statewide average for an associate's degree is $13,147. Nearly half of the students in Colorado who earned bachelor's degrees had student loan debt, with an average of 49.3%.
Borrowers are considered delinquent after one missed payment, and loans more than 90 days past due are reported to credit bureaus, which can limit access to future credit. After 270 days of nonpayment, borrowers enter default. Those in default may have wages garnished. Notices were expected to begin for the first 1,000 borrowers last week.
Officials say understanding this timeline is crucial as more borrowers begin receiving notifications. Here are a few steps borrowers affected by the changes can take to get ahead.
Firstly, borrowers should contact their servicer. They can choose from two options: loan consolidation or loan rehabilitation. Their individual circumstances will determine their eligibility.
Loan consolidation is when the principal and any interest owed are rolled into a direct consolidation plan. Then, the borrower will pay a new loan under what's called an "LDR," or income-driven repayment plan. Based on their plan, it can pay 10-20% of their discretionary income for 20 years.
Under loan rehabilitation, the borrower agrees to the terms and makes nine on-time payments over 10 months. The servicer will determine the amount. It will likely be 10-15% of the borrower's monthly income.
Ultimately, student loan borrowers have options going forward. It's all about taking the first step and speaking with their loan servicer to determine what is most realistic for them and their budget.
