CNN

Anxiety, fear set in for student loan borrowers in default

By CNN Newsource

Published May 4, 2025 5:00 am

By Piper Hudspeth Blackburn and Sunlen Serfaty, CNN

(CNN) — When a car accident nearly killed Davina Rush’s son three years ago, forcing her to leave her job and become his full-time caregiver, she stopped paying her $49,000 in student loan debt. Now, the 42-year-old single mother from Florida is one of the millions of borrowers in default who risk having their benefits and wages garnished.

“I am very worried,” she said when asked about what that would mean for her and her 23-year-old son, who is contending with a severe brain injury. “If they took anything out of my pay, it would literally be taking food out of our mouths.”

The Education Department announced in April it would restart collecting federal student loans in default on May 5, ending a pandemic-era pause that began roughly five years ago, and leaving more than 5 million Americans like Rush scrambling to find a solution.

The change comes at a particularly challenging time for borrowers as the overall economy shows signs of sputtering. President Donald Trump’s tariff plans have rattled global markets and the US economy. Inflation could amplify hardship for borrowers, particularly those in default, experts say.

“Things like housing and eggs and lettuce cost a lot more than they did before. So what might have been affordable before might not be affordable now,” said Betsy Mayotte, president of the Institute of Student Loan Advisors, a nonprofit that provides free student loan advice.

Last month, Education Secretary Linda McMahon vowed to end what she called “the Biden-era practice of zero-interest, zero-accountability forbearances,” arguing the previous administration’s policies further burden taxpayers.

“Borrowing money and failing to pay it back isn’t a victimless offense. Debt doesn’t go away; it gets transferred to others,” she wrote in an opinion piece for The Wall Street Journal. “If borrowers don’t pay their debts to the government, taxpayers do.”

Making hefty monthly payments could upend the lives of people like Leslie Gray, a 46-year-old therapist who lives in Kansas City, Missouri. The Biden administration’s pause on payments was a “lifesaver,” she said, allowing her to pay off the medical debt she racked up after overcoming breast cancer in 2017. Gray had put her student loans in forbearance as she lost out on some work to undergo several surgeries, but it didn’t keep her from her job entirely.

“I gave big talks to sheriff’s departments to educate them about mental health with my bald cap on,” she recalled. “My work is very important to me and I’ve never had the luxury of being able to really take care of what needs to be taken care of for my health.”

Gray is facing $185,000 in student loan debt. Her plan is to sell her house, buy a small, cheap RV and live in the backyard of her parents’ house in Florida. As the May 5 deadline inches closer, she said the financial stress is slowly wearing away at the perception she has had about herself and her career.

“I’ve done great work for my patients in my life. I’m proud of that,” she explained. “I had to make a lot of sacrifices, you know, and I did pay student loans when I could.”

“And then just, of course, things got more expensive and I still didn’t make much. It took me 20 years to make the amount that I make now,” she added.

She told CNN that she would “happily” pay a reasonable amount on her loans, but it’s been difficult getting someone at the Education Department to answer her questions about how to make that happen.

In a response to a CNN request for comment on borrowers having difficulty finding out their options for repayment, the Education Department noted it had taken steps to communicate with borrowers, extended hours for default call centers and was emailing them with instructions on how to contact their loan servicer, among other actions.

More borrowers at risk of default

The Education Department warned last month that there could be 10 million borrowers in default within the next few months: in addition to the more than 5 million borrowers in default, 4 million more are delinquent, which means they haven’t made a payment in over 90 days.

The agency has urged borrowers in default to contact the student aid office’s Default Resolution Group and make a monthly payment, enroll in an income-driven repayment plan or sign up for loan rehabilitation.

For borrowers who are facing severe financial stress, it’s also possible to discharge loans in bankruptcy if they meet certain criteria.

Federal guidance put in place during the Biden administration simplified the burdensome process of showing undue hardship and made it easier for government lawyers to recommend to courts that the debt be discharged.

Malissa Giles, a consumer bankruptcy lawyer in Virginia, told CNN that her perception is that “the current administration will be less generous than the Biden administration was” but that bankruptcy could still be an option.

It’s important for borrowers to act early and figure out a way to manage their loans before they go into default, Mayotte, the student loan expert, said. “If you can’t afford your loan now, you’re really not going to be able to afford it if you let it default.”

There are high fees that get tacked onto federal student loans when they go to collections. Borrowers in default can also lose out on more affordable income-based repayment options, deferments or forbearance, which can temporarily postpone payments altogether, Mayotte added.

The Elon Musk-led Department of Government Efficiency effort to slim down the federal workforce is also impacting some borrowers. When the second round of buyouts for federal workers offered by the Trump administration came to the Internal Revenue Service, Jim Mawhinney, a 55-year-old from Pittsburgh, took it after just six months on the job.

He felt that he would be fired eventually, and though he’ll receive a paycheck from the IRS until September, the pressure is mounting.

“I could have had that job and done that job into retirement and then had a pension afterward. I know I am not going to get that somewhere else. So, I think that is the worst part about it. It is devastating because it was my dream job,” the former revenue agent said.

He said he’s still in $100,000 in debt from his time in college in the 1990s. It has built up over the years, he told CNN. There have been some years he’s paid; others he hasn’t. “At this point, I am just paying interest, my loans are 30 years old,” he noted. “Deferment is the kiss of death. The interest built up.”

He hasn’t been able to find work that will provide the same amount of pay and stability and is unsure of how he’ll be able to make payments.

“(It is) ironic that they are going to start to garnish federal wages after forcing me to leave my federal job where I could pay my loans on my own,” he said. “I am terrified about what is going to happen.”