Apprehension and Fear Spike Among Student Loan Debtors in Delinquency Status
Rewritten Article:
When a tragic car accident left her son fighting for his life three years ago, forcing Davina Rush, a 42-year-old single mother from Florida, to become his full-time caregiver, she was forced to set aside her $49,000 student loan debt. Now, with the impending resumption of student loan collections, she and millions of other borrowers like her are bracing for the financial impact of having their benefits and wages garnished.
"I'm certainly anxious about what that would mean for me and my son," she admitted, speaking about the potential financial strain. "If they took anything out of my pay, it would basically mean taking food off our table."
The Education Department announced in April that it would revive collections on federal student loans in default as of May 5, ending a pandemic-era freeze that began nearly five years ago. This sudden shift has left more than 5 million Americans struggling to find a solution.
The timing for this change could hardly be worse, as the broader economy shows signs of slowing down. Donald Trump's tariff plans have sent shivers through global markets, and inflation could intensify hardships for borrowers, particularly those in default. As Betsy Mayotte, president of the Institute of Student Loan Advisors, explained, "The cost of basic necessities like housing and produce has soared, so something affordable before might no longer be feasible now."
Last month, Education Secretary Linda McMahon signaled her intention to end what she called "the Biden administration's practice of interest-free, accountability-free forbearances," arguing that previous policies added further burdens to taxpayers. In a piece penned for The Wall Street Journal, she argued, "Borrowing money and not repaying it isn't a victimless offense. Debt doesn't just disappear; it gets transferred to others."
Leslie Gray, a 46-year-old therapist in Kansas City, Missouri, knows all too well the challenges of juggling medical debt alongside student loans. The Biden administration's suspension of student loan payments was a lifeline for her, allowing her to pay off her mounting medical bills after successfully overcoming breast cancer in 2017. She had put her student loans on hold during her treatments, but they didn't entirely release her from her job.
"I didn't have the luxury of completely stepping away from my work during those difficult times," she recalled. "The student loan reprieve was essential to keeping my head above water."
Gray now faces a mammoth $185,000 student loan debt burden. With the looming May 5 deadline fast approaching, she's weighing her options: selling her house, purchasing a small, affordable RV, and parking it in her parents' backyard in Florida. The financial pressure bears heavily on her self-perception and outlook on her career.
"I've dedicated my life to helping my patients, and I'm proud of the work I've done," she explained. "I've made many sacrifices, but it was still difficult to keep up with my student loan payments. The interest kept piling up, and my salary wasn't enough to cover it."
Gray has expressed her readiness to pay a reasonable amount on her loans, but getting a response from the Education Department has been challenging. She told CNN that she thinks she would happily pay a fair sum, but it's been hard to get someone from the Education Department to answer her questions about how to proceed.
In response to CNN's request for comment on borrowers' difficulties in understanding their repayment options, the Education Department pointed to steps it has taken to inform borrowers, such as extending default call center hours and emailing them guidance on contacting their loan servicers, among other actions.
Millions More in Peril
With the resumption of collections imminent, the Education Department has warned that the number of borrowers in default could soon skyrocket to 10 million. In addition to the 5 million borrowers already in default, another 4 million are delinquent—meaning they've missed payments for over 90 days.
The agency has advised delinquent borrowers to reach out to the default resolution group, make a monthly payment, enroll in an income-driven repayment plan, or sign up for loan rehabilitation.
For borrowers grappling with severe financial duress, it might be possible to discharge loans in bankruptcy, provided they meet specific criteria. Federal guidance put in place during the Biden administration simplified the arduous process of demonstrating undue hardship, making it easier for government lawyers to recommend loan discharge to courts.
Malissa Giles, a consumer bankruptcy lawyer in Virginia, expressed her view that "the current administration might not be as generous as the Biden administration was" but that bankruptcy could still be an option for those in dire straits. Acting promptly and finding a solution for managing loans is crucial, noted Betsy Mayotte, the student loan advisor.
"If you can't afford your loan now, you won't be able to afford it once it defaults," she cautioned. "There are high fees tacked onto federal student loans when they go to collections, and borrowers in default can lose access to more affordable income-based repayment options, deferments, or forbearance."
The Trump administration's push to downsize the federal workforce has impacted some borrowers. Last year, when the second round of buyouts for federal workers offered by the Trump administration reached the Internal Revenue Service, Jim Mawhinney, a 55-year-old from Pittsburgh, seized the opportunity. After just six months on the job, he felt that his position was in jeopardy. Although he'll receive a paycheck until September, the pressure is mounting.
"I could have kept my job and aimed for retirement, eventually earning a pension," he said. "But leaving the IRS was devastating because it was my dream job."
He still carries $100,000 in debt from his college days in the 1990s, which has accrued over time. Some years, he made payments; others, he didn't. "At this point, I'm just paying interest. My loans are 30 years old," he noted. He's struggled to find work that offers comparable pay and stability, and he's unsure how he'll manage his payments moving forward.
"Ironically, the government is about to start garnishing federal wages after forcing me to leave my federal job where I could pay my loans on my own," he said. "I'm terrified about what the future holds."
- Davina Rush, a 42-year-old single mother from Florida, is concerned about the resumption of student loan collections, as it may lead to benefits and wages being garnished, potentially affecting her and her son's stability.
- Leslie Gray, a 46-year-old therapist in Kansas City, Missouri, is considering drastic measures like selling her house and living in a small RV due to the mounting pressure of her $185,000 student loan debt, which she can hardly manage despite her career in personal-finance and education-and-self-development.
- The Education Department's resumption of collections on federal student loans in default may result in the number of borrowers in default increasing to 10 million, with an additional 4 million borrowers already delinquent.
- Betsy Mayotte, president of the Institute of Student Loan Advisors, advises borrowers to proactively manage their loans, as failing to do so now may lead to high fees and loss of access to more affordable repayment options once a loan goes into default.
