New York State issues warning to student borrowers: Payments need to resume
Federal student loan repayments resumed in October 2023, but there was a grace period protecting borrowers. Credit: AP / Seth Wenig
New York State officials are warning student loan borrowers that the 12-month grace period that had protected them from being reported to credit bureaus due to late or missed payments ended this month.
"As the federal student loan grace period has now ended, the New York Department of State's Division of Consumer Protection is warning student loan borrowers to avoid scams and negative financial and credit reporting consequences while navigating the loan repayment process," the office said in a statement Tuesday.
"Any late or missed federal student loan payments can now be reported to the credit bureaus, which can lead to severe negative consequences for borrowers who are unable to make payments," the statement said.
New York Secretary of State Walter T. Mosley urged borrowers to "work directly with their loan servicer to help prevent significant financial and credit reporting consequences" if they can't afford their payments.
Federal student loan payments resumed in October 2023 after a three-and-a-half-year pause triggered by the COVID-19 pandemic. After that, borrowers had a yearlong grace period protecting them from being reported to credit bureaus for being delinquent in payments. That grace period ended this Oct. 1, the department said.
"Don't trust any person or program that promises you special access or guaranteed eligibility for loan forgiveness," the department's statement cautioned. "You might be contacted by a scammer saying they will help you get your loan canceled or reduced for a fee. You will never need to pay for advice or help with your federal student loans or any deferment or income-based plans. All federal student loan borrowers can stay updated at no cost by contacting the U.S. Department of Education directly at StudentAid.gov."
Some of the consequences stemming from late or missed payments, the department noted, include negative information on a borrower's credit report.
Continued missed payments can put the loan in default, leading to the withholding of federal income tax refunds, garnishment of wages or loss of eligibility to receive deferment, forbearance of the loan or additional federal student aid.
The department encouraged student loan borrowers to understand the repayment process by getting updated with sources such as the Department of Education's webpage, ed.gov. It was also recommended that borrowers log into their StudentAid.gov account to ensure their contact information is up to date.
Borrowers can also go to edcapny.org, the website of the Education Debt Consumer Assistance Program, which helps New Yorkers navigate the student loan process by offering free, one-on-one counseling and other resources.
In addition to the website, borrowers seeking help can also call the program at 888-614-5004, or email edcap@cssny.org for more information.
