Betsy Mayotte

For defaulted borrowers, HR1 also creates an additional opportunity for people that default multiple times to get their loans out of default through a process called loan rehabilitation.

And rehabilitation can be really beneficial to someone's credit in particular.

There's a lot more changes with HR1, but we only have 20 minutes, so I'm going to stop there and let you ask me more questions.

Yeah, I think that's a really good question for your listeners because there's a lot of confusion around that.

Federal student loans are kind of a unique animal in a lot of ways.

And one of those ways is the way we look at someone who's past due on their loans.

So with a lot of consumer debt, you're considered in default if you're 30 days past due or maybe 60 days.

With federal student loans, that's not the case.

In fact, they don't even report you to the credit bureaus as delinquent until you're at least 90 days past due.

But even then, you're not considered in default.

Federal student loans aren't considered in default until they're at least 270 days past due.

And even then, you still have sort of a...

a grace period or Hail Mary period to resolve that before the really big whammies, consequences of defaults hit you, such as the collection costs, the wage garnishment, the tax refund offset, the Social Security offset.

That doesn't happen until the loans are over 270 days past due and actually get moved over to the Department of Education's collection agency, which is called DMCS.

So again, you're not reported to collection bureau agencies until you're at least 90 days past due.

You're not considered in default until 270 days past due.

But if you're at day 270 or more, but your loans are still with a servicer like Ed Financial or Advantage or Mojila, you could still save it by calling the servicer and asking for forbearance.

Yeah, so unfortunately, Parent Plus borrowers, I think, got hit harder than most.

And I don't think that has really clicked with people yet.

I think it's going to be something to watch over the next few years.