JACKSONVILLE, Fla. – The federal government is resuming collections on defaulted student loans after a more than four-year pause that began during the COVID-19 pandemic, and the effects of the decision are being felt locally.
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As of Monday, federal student loans in default are being referred to collections, and that could mean serious financial consequences for borrowers. The U.S. Department of Education has confirmed that the Treasury Department’s offset program is back in effect as of May 5, which means the government can garnish wages, seize tax refunds, and withhold portions of Social Security benefits to repay delinquent loans.
Borrowers are considered delinquent after missing a payment for 90 days. If the loan remains unpaid for 270 days, roughly nine months, it goes into default.
“I’m going to do everything possible not to be one of those people,” said local student loan borrower Heather Lawton, who holds nearly $170,000 in student loan debt after earning two master’s degrees, adding that the changes to the system are already causing financial stress and uncertainty.
Lawton consolidated her loans and applied for an income-driven repayment plan last year. She even picked up a second job to stay ahead of payments, but was hit with a monthly bill more than double what she expected.
“I’m wanting to do the right thing,” Lawton said. “But $1,000 is steep for my income. Even with two jobs, that would be a huge hit for my budget.”
Lawton says her loan servicer made multiple errors processing her repayment plan, and her frustration only grew after spending hours on the phone trying to fix it, just to be disconnected following a lengthy wait.
“At one time, I waited six hours on the phone and got disconnected,” she said. “I also filed a complaint with the student federal aid office, and, of course, with the cuts at the Department of Education. From what I understand, there’s no one there, and that was back in March, and it’s still that complaint is still sitting there.”
With no help from her loan servicer, Lawton escalated her complaint to the Consumer Financial Protection Bureau. Months later, she says she’s still waiting for a resolution.
“I don’t regret my education, even though it came at such a high cost. I will be accountable for my debts,” she said. “But I also need the servicer to do what the taxpayers are paying them to do, their job.”
Lawton is not seeking forgiveness, but she says real reform is needed for borrowers willing to pay, but struggling to navigate a broken system.
The Department of Education says it will begin notifying borrowers with defaulted loans in the coming weeks. In the meantime, officials are encouraging people to contact the Default Resolution Group to learn about their options, including setting up a monthly payment, enrolling in an income-driven repayment plan, or pursuing loan rehabilitation.
The full interview with Lawton can be watched below.