After five years of policy changes that included a payment pause during the pandemic, millions of Americans delinquent on student loans are being directed to pay up.
The government is threatening to deduct money from wages or seize tax refunds and Social Security benefits, starting this summer.
At the same time, loan holders face reduced repayment options and administrative slowdowns on top of general confusion about navigating a system in flux. Congress may have changes of its own coming soon.
Why We Wrote This
Student loan policies have shifted over the past five years. Now, as delinquent loan collection resumes amid staff cuts and confusing options, some are losing trust in the system as they try to make potentially consequential choices.
“It’s very hard to budget your life when you don’t know how much you’re going to be paying on your student loan next year,” says Natalia Abrams, founder of the Student Debt Crisis Center, which educates borrowers on navigating the student loan system.
Ms. Abrams calls this the most confusing period in student loans since she started the nonprofit 14 years ago.
About 1 in 5 student loan holders are at least 90 days delinquent – nearly twice the rate just before the pandemic. After nine months of missed payments, delinquency escalates to default, which has more serious legal and financial consequences. Borrowers in default are now subject to collection efforts, after a five-year pause.
“What we’re concerned about are the number of folks that could default soon, in addition to the ones already in default,” Ms. Abrams says.
Nearly 43 million Americans hold $1.7 trillion in federal student debt. At the end of 2024, just under 5% of that debt was in default. More than 5 million borrowers have skipped monthly payments for at least a year, according to the Department of Education.
Being classified as delinquent, too, carries costs for borrowers. In the first quarter of this year, about 2.4 million newly delinquent student loan borrowers saw their credit scores cut and “will now face steeper borrowing costs or denial for new credit,” according to a recent report by researchers at the Federal Reserve Bank of New York.
Both President Donald Trump and his predecessor, Joe Biden, suspended loan payments during the COVID-19 pandemic. Mr. Biden reduced or eliminated loans for some; the Supreme Court then blocked his most aggressive loan forgiveness plan.
Also under Mr. Biden, 8 million borrowers signed up for the SAVE plan, which lowered payments for qualified borrowers on a path to debt forgiveness. That plan is in limbo because of a court challenge.
Some borrowers are confronting additional uncertainty. Mr. Trump cut Department of Education staff by half and threatened to dismantle it – moves that were halted May 22 by a federal judge, whose decision will be challenged, the administration says. Amid that staff upheaval, the president asked the department to reassess public-service loan forgiveness, by which students who go into qualified government or nonprofit work can have their loans discharged.
Even for those on track, there’s a lot to keep up with.
Ready to make payments
About 4 in 10 borrowers are current on their loans. The rest are in forbearance or default, or are delinquent. Even some in good standing struggle to untangle the system.
Jessica Fugate was on a 10-year Pay As You Earn program, and then switched to SAVE to reduce her monthly payments. She has spent the last few months wondering about the status of her loan, which was put into forbearance – her payments on pause – pending the outcome of the SAVE court challenge.
While she was talking with the Monitor, Ms. Fugate checked her account online and saw that the time her loan was in forbearance counted as monthly payments, meaning that in December, her loan would qualify for forgiveness.
But after years of trying to manage her loans, she says her trust in the government is eroded. “I have no high hopes that it will go away. Yeah. I don’t believe it.”
Kris Heitkamp had also entered the SAVE program, working toward forgiveness through her work at the University of Utah. She, too, is in forbearance. At the time of this interview, she had made 74 of 120 payments.
“It’s been a little frustrating because I want to make payments,” she explains. But her last one, she says, was in May 2024 because she can’t pay while she’s in forbearance. She applied in January for a different repayment plan. But she hasn’t been able to reach someone who can answer questions about her application.
Meanwhile, her $81,000 loan has ballooned to $115,000. The loan felt manageable when she was on the path toward forgiveness. But now, “I’m just kind of nervous,” she says, especially since there’s no guarantee that existing repayment and loan forgiveness plans will be grandfathered in if the qualified employers change under President Trump.
Courtesy of Kris Heitkamp
Paying even in retirement
David Perez doesn’t pay a dime toward the $28,000 he borrowed to get a degree from the University of La Verne in California in 2011, but when he heard the news about loan payments being due and the payment freeze ending, he got antsy.
“I checked up on what I owed a few weeks ago. I was concerned about whether I still qualified for forgiveness and it says yeah,” he says. “I was a lot better off than I anticipated.”
Mr. Perez says he has until December before he has to start paying his new monthly premium. The scariest of his thoughts when he heard the news was that they would try to get him to pay the entire amount right now, but he didn’t dwell on it for long.
“I was figuring that they wanted to collect the whole debt and I thought, ‘Good luck with that.’”
For a few years after he finished his degree program, Mr. Perez paid the $150 a month that was required of him. But then, the retiree, who hadn’t worked for years and is now 76 years old, applied for an income-driven plan that changed his financial situation.
“It was because I met certain qualifications. I didn’t find a job, and my pension qualified me for no payments,” says Mr. Perez, who now lives in Tucson, Arizona, and has been substitute teaching for two days a week for the past three years. He earns $160 a day. The extra money made him wonder if his pension would be garnished under the new administration’s plans. Instead, he’ll be paying well under $100 per month, on debt that has grown to $38,000 because of interest.
From relief to delinquency
The years of debt payment relief have helped some borrowers. But one study shows that the longer borrowers go without making payments, the more likely they are to default. The relief programs also reduced the overall risk of delinquency, but that gap narrows over time. Some evidence suggests “This is likely due in part to borrowers becoming less connected with the student loan system payment system writ large,” says Lesley Turner, a public policy professor at the University of Chicago who conducted the study.
The policy shifts have also changed borrowers’ expectations of relief. When President Biden expanded loan forgiveness, people shifted spending from loan repayment to cars, homes, and increased credit card debt.
“I think there are lessons there for what people would be doing now,” says Dmitri Koustas, an economist at the University of Chicago. “There might be shocks in the other direction,” he says, adding that many spending decisions, such as whether to pay off a loan early or not at all, or whether to buy a house, have long-term consequences.
People interpret different policies differently, says Dr. Koustas. “If you have certainty, you can then make an optimal plan,” he says.
Will Congress eliminate SAVE and other forgiveness?
Policies appear likely to evolve again.
The House last week voted to eliminate SAVE and other forms of student loan forgiveness as part of President Trump’s “Big Beautiful Bill.” Changes in that bill, now awaiting Senate action, include an overhaul of income-driven repayment plans, a new repayment assistance plan, and new caps on borrowing.
Dr. Turner says it’s too soon to assess the potential economic impact of resuming collection of student loans.
But with fewer income-driven repayment options, loan staff stretched thin, and possible changes to some loan forgiveness programs and to the Department of Education itself, uncertainties are piling up.
And it comes at a time when federal loans are an essential bridge for students trying to survive in – and finish – college.
“College is still so valuable and worth it,” says Ms. Abrams of the Student Debt Crisis Center. “But I do fear that we are discouraging people with rapidly increasing costs of college, on top of a very confusing student loan program that has not been working.”
Ms. Heitkamp says she just wants transparency. “It’s definitely taken up a lot of headspace,” she says. “Now it’s kind of back to, OK, I need to be more on top of that or just keep an eye on things. Be my own watchdog.”
Staff writer Ira Porter contributed to this article.
