The Trump Administration announced it will resume collection efforts on defaulted student loans for the first time in five years. The change will affect 5.3 million student loan borrowers who went into to default before the COVID Pandemic. Technically, a borrower is considered in default when they fail to make a payment for at least 270-Days. Even more borrowers are delinquent on their payments and may be headed toward default. According to data provided by the Department of Education, 2.9 million borrowers are 61-90 days late on their loan payments. Another 4 million are in “late-stage delinquency,” have been reported to the credit bureaus and are quickly approaching default. The collection efforts go into effect May 5, 2025, and can actions such as wage garnishment up to 15% of the borrowers disposable income or recovery of tax refund. The changes announced can impact your mortgage qualification. Your credit score may be change, and not for the better. How does the Student Loan Payment impact your mortgage qualification? Did you know that Fannie Mae, Freddie Mac, FHA and VA all have different guidelines for Student Loans? Are you in Student Loan Deferment? Do you have an Income Based Repayment Plan (IBR)? What payment is reflected on your credit report? All of these things matter. If you are looking to buy your new home, and have a Student Loan, please contact a FDM Mortgage Professional to determine if the recent Student Loan repayment announcement will impact you.
