It’s been five years since the federal government hit “pause” on student loan collections.
For millions of Americans, that pause offered a lifeline—a chance to focus on family, career, or simply staying afloat. But starting May 5, collections resume. And this time, the government is collecting with interest.
What That Means in Real Life
If a student loan is more than 90 days past due, it’s flagged to the credit bureaus. After 270 days, it’s in default—and that’s when the real trouble starts.
Wage garnishment.
Tax refunds intercepted.
Social Security benefits reduced.
Credit scores drop by the dozens—sometimes hundreds—of points.
This isn’t theory. It’s happening right now. And for more than 5 million borrowers who haven’t made a payment in over a year, it’s about to hit home.
So What Do You Do If You’re a Homeowner?
Here’s what many don’t realize: one of the most powerful tools for solving this problem might be sitting in the walls of your home.
It’s home equity—and it can do more than just lower your mortgage. Used strategically, it can help eliminate student loan debt altogether, before collections start knocking on the door.
A New Kind of Strategy for a New Kind of Debt
At NEO Home Loans, we’ve helped homeowners use their equity in ways that go beyond the traditional playbook. This isn’t just about refinancing to get a lower rate—it’s about using what you’ve built to protect what you’ve earned.
Here’s how:
Home Equity Line of Credit (HELOC)
Fixed-rate. Predictable. Doesn’t touch your existing mortgage. A smart way to pay off student loans in full—and do it on your terms.
Home Equity Loan (HELOAN)
Think of it like a credit line, but more stable. You draw funds as needed, with repayment terms that are structured and manageable. Ideal for people juggling multiple debts or on the edge of default.
Cash-Out Refinance
The most powerful tool for those who need to reset their financial landscape. Roll high-interest debts into a single payment, often reducing total monthly obligations and increasing peace of mind.
These aren’t gimmicks—they’re strategic decisions rooted in financial planning.
But Here’s the Truth: Timing Matters More Than Ever
When collections resume, there’s no grace period.
No friendly warning.
No negotiation window.
Your paycheck could shrink without notice. Your credit score could drop before your next mortgage application. And if you wait too long, the equity solution may no longer be available to you.
What’s Next?
Start by asking yourself:
Has your home value increased in the last few years?
Do you have student loans you haven’t been able to pay?
Would a lump sum or new repayment plan help you get back on track?
If the answer is yes—even to one of those—it’s worth having the conversation.
Student loans don’t make you irresponsible. Life happens. Businesses start. Careers shift. Families grow.
But waiting for collections to hit—hoping things work out on their own—only leads to harder roads later.
Your home is more than a roof. It can be a way out, a safety net, and a strategic tool to protect what you’ve worked so hard to build.
For those concerned about student loan defaults or simply looking for smarter ways to manage debt, the best time to explore options is before May 5.
Schedule a no-cost consultation to understand what your home equity can do for you.
