CINCINNATI (WXIX) – The Department of Education will restart its collection of federal student loans in default on May 5.
The move marks the end of a five-year-long pandemic-era pause that could impact millions of people.
Some loan borrowers tell FOX19 NOW that while their loan is not in default, rising costs make it easier to fall behind.
Students at the University of Cincinnati, who have not had to start paying their loans yet, said this new reality is adding another layer of pressure to what the future will hold when they graduate.
“I don’t have time for a second job, but I’ve been looking for a second job for another stream of income,” said a loan borrower in Northern Kentucky who wished to remain anonymous.
This Tri-State loan borrower is working to pay off more than $100,000 in student loan debt.
Her monthly loan payment is currently $800, which is more than half of her rent.
“The tremendous amount of financial stress that it brings,” described the anonymous loan borrower.
That stress doubled after the U.S. Department of Education announced it would resume collections of federal student loans in default, something that hasn’t been done since March 2020.
“Historically, I’ve been very close to being there,” explained the anonymous loan borrower. “With how tight my budget is and how much money I have going towards debts, anything can cast me into a financial crisis.”
The involuntary collection means the government can take funds out of borrowers’ tax refunds, Social Security benefits and wages to go toward paying back the loan.
White House Press Secretary Karoline Leavitt says restarting student loan collections will protect taxpayers.
“Debt cannot be wiped away, it just ends up getting transferred to others, so why should Americans who didn’t go to college or went to college and responsibly paid back their student loans pay for the student loans of other Americans?” Leavitt stated.
Student loans go into default after 270 days without payment.
According to the department, more than 5 million borrowers are in that category, with more than 4 million others on their way.
Borrowers 90 days late on their payments land in delinquency, which affects credit scores and is a step away from default.
The department is now urging borrowers in default to start making monthly payments or enroll in an income-driven repayment plan.
“Myself included, people who have tried to submit for the income-driven repayment plan, the plan hasn’t been reviewed, it hasn’t been approved,” the anonymous loan borrower said. “I’ve been waiting for a few months, so it’s not for lack of trying to make this work with my income.”
The department says it is working with federal student loan services to begin processing those repayment plan applications next month.
The department says all borrowers in default will receive email communications from FSA in the next two weeks, making them aware of these developments and to talk about their options.
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