Federal student loan collections to resume after 5 years

Yahoo

02-05-2025

LAS VEGAS (KLAS) — On Monday, the Office of Federal Student Aid will resume collections on defaulted federal student loans for the first time in five years.
The pause was first implemented in 2020 under the Trump Administration as a response to the COVID-19 pandemic and continued by the Biden Administration. As a result, the U.S. Department of Education will initiate involuntary collections for defaulted borrowers, a category to which 12 percent of those with student loans in Nevada fall, according to numbers from the Education Data Initiative.
'I'm definitely anxious, definitely concerned,' said Stephanie Gentry, a student, who likened her state of financial worry to a tsunami. 'I'm not really sure how it's all going to pan out.'
Gentry, working toward her second degree while studying medical laboratory science at the College of Southern Nevada, described the years-long pause on federal loans as a relief, adding that she is unlikely to be able to afford repayments.
'I felt a glimmer of hope for some form of student debt cancellation,' Gentry said.
According to the Education Data Initiative, proponents of cancelling student debt cite data that indicates would-be entrepreneurs are 11 percent less likely to start a new business when holding more than $30,000 in student loan debt.
Opponents of cancelling student debt believe the action would lead to inflation and higher interest rates. One data model cited by the organization indicates that each dollar spent on student loan forgiveness could return between 2 and 27 cents in economic activity.
Then there's the issue of fairness between those who successfully paid off their loans and those who haven't. Gentry believes it shouldn't be a determining factor.
'So what? If you had polio when you were a kid, should I also get polio?' she said,
According to data from a 2024 UChicago Harris/AP-NORC Poll, 65 percent of those who have either paid off their student loans or never had student debt did not consider student loan forgiveness important, while 54 percent did. For her part, Gentry, a mother of three, hopes her children will have free college when the time for higher education comes.
'I want them to have everything they could possibly need,' she said. 'Because that's how you know you're in a healthy and well-structured society.'
U.S. Department of Education estimates show that 25 percent of the federal student loan portfolio will be in default on their loans within months of resuming collections. That data indicates that more than 5 million monthly borrowers have not made a monthly payment in nearly a year. Four million borrowers haven't made a payment in 91 to 180 days, and have entered 'late-stage delinquency,' data show.
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