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Surge in Student Loan Borrowers Pleading for Money to Help Pay Off Debts
Surge in Student Loan Borrowers Pleading for Money to Help Pay Off Debts

Miami Herald

time08-05-2025

  • Business
  • Miami Herald

Surge in Student Loan Borrowers Pleading for Money to Help Pay Off Debts

A growing number of Americans are asking to borrow money from others in order to pay down their student loans, amid ongoing economic uncertainty and the recent resumption in federal loan collections. Peer-to-peer lending platform SoLo Funds told Newsweek it has seen a 12-percent spike in members asking for assistance in paying their loans in 2025 compared to last year, with co-founder and President Rodney Williams adding: "We only expect that number to go up." The country's educational debt highlights the broader economic strains facing many Americans, expected to worsen through 2025 as fears of a recession begin to manifest. With the resumption in student loan collections-which will include wage garnishments-borrowers in default may be facing even greater economic difficulties in the near future. The federal government resumed student loan collections earlier this week, following a five-year hiatus enacted at the beginning of the COVID-19 pandemic. In addition to voluntary repayment plans, the "Treasury Offset Program" will allow the government to garnish wages, seize tax refunds and reduce Social Security benefits to pay down educational debts. According to the Department of Education, around five million borrowers have not made a loan payment in over a year, with millions more in "late stage delinquency." As a result, it said that 10 million could soon be in default and subject to involuntary collection efforts. An estimated 43 million have student loan debt in the U.S., and outstanding debt currently totals nearly $1.7 trillion, according to the Education Data Initiative. SoLo Funds President Rodney Williams said the increase in Americans turning to community finance platforms to pay off student loans was indicative of wider economic struggles, outlined in the company's '2025 Cash Poor Report." The report found that around two-thirds of cash-poor Americans-those living paycheck to paycheck-were from the Millennial and Gen X age bracket, and 14 percent were African American. Additionally, 40 percent of cash-poor Americans have full-time jobs, and one in every seven cash-poor households earns over $75,000 annually. Rodney Williams, Co-founder and President at SoLo Funds told Newsweek: "Student loans is an example of another financial expense that they have to withstand. Only a little more than a third of the nearly 43 million people who have student loan debt have made regular payments. This indicates possible variability of income and a strain on budgets. Many Americans are now turning to innovative platforms with less barriers to borrow money for necessities -- not just emergencies which is a positive trend as traditional options are more expensive." U.S. Secretary of Education Linda McMahon, in the April 21 announcement, said: "American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies." McMahon continued: "Going forward, the Department of Education, in conjunction with the Department of Treasury, will shepherd the student loan program responsibly and according to the law, which means helping borrowers return to repayment-both for the sake of their own financial health and our nation's economic outlook." Beth Akers, Senior Fellow at the American Enterprise Institute,told Newsweek: "It is seldom discussed in mainstream coverage of this issue, but there have long been safety nets in place that allow borrowers to make reduced payments that are affordable based on their current income. And when debts remain unaffordable they will ultimately be forgiven. Borrowers looking for that sort of help should go to the Department's website and look for how to enroll in income-based repayment." "Borrowers should immediately contact the servicer of their loan and ask about income-based repayment options," she said. "They will be asked to prove their income and then their payments will be reduced to an affordable level." Robert Kelchen, Head of the Department of Educational Leadership and Policy Studies at the University of Tennessee, Knoxville, told Newsweek: "Student loan repayments have to begin at some point, and they probably should have restarted well before they actually did. But regardless of whether the pause in collections is one year or five, any pause is going to be problematic for students and the companies that service student loans. "People with larger loans can access income-driven repayment plans to help them manage their loans," he added. "I am concerned that servicers and the Department of Education do not have the staff to help students who run into issues signing up for those plans." Student financial aid expert Mark Kantrowitztold Newsweekthat the resumption of involuntary collections means "that the defaulted borrower will have less income to pay for necessities." "Of course, borrowers who repay their student loans have less income available to pay for other priorities too," he said. "But, a borrower who defaults on their student loans will have proportionately less income available in part because the collection charges slow the trajectory toward paying off the debt in full." Kantrowitz added that those experiencing long-term financial difficulties should consider switching to an income-driven repayment plan, which reduces the monthly cost by increasing the repayment term to 20 to 25 years. However, he warned that this will increase the total cost of the loan. The Education Department has urged those struggling with loan repayments to visit to see the available options. Related Articles Student Loan Collections Resume Today: What You Need To KnowStudent Loans: The Best Repayment Plans AvailableHow to Know if Student Loans Are in Default Before Change Happens Next WeekRepublicans Urge Treasury to Keep 'Critical' Fund After Trump Order 2025 NEWSWEEK DIGITAL LLC.

Surge in Student Loan Borrowers Pleading for Money to Help Pay Off Debts
Surge in Student Loan Borrowers Pleading for Money to Help Pay Off Debts

Newsweek

time08-05-2025

  • Business
  • Newsweek

Surge in Student Loan Borrowers Pleading for Money to Help Pay Off Debts

Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. A growing number of Americans are asking to borrow money from others in order to pay down their student loans, amid ongoing economic uncertainty and the recent resumption in federal loan collections. Peer-to-peer lending platform SoLo Funds told Newsweek it has seen a 12-percent spike in members asking for assistance in paying their loans in 2025 compared to last year, with co-founder and President Rodney Williams adding: "We only expect that number to go up." Why It Matters The country's educational debt highlights the broader economic strains facing many Americans, expected to worsen through 2025 as fears of a recession begin to manifest. With the resumption in student loan collections—which will include wage garnishments—borrowers in default may be facing even greater economic difficulties in the near future. What To Know The federal government resumed student loan collections earlier this week, following a five-year hiatus enacted at the beginning of the COVID-19 pandemic. In addition to voluntary repayment plans, the "Treasury Offset Program" will allow the government to garnish wages, seize tax refunds and reduce Social Security benefits to pay down educational debts. According to the Department of Education, around five million borrowers have not made a loan payment in over a year, with millions more in "late stage delinquency." As a result, it said that 10 million could soon be in default and subject to involuntary collection efforts. An estimated 43 million have student loan debt in the U.S., and outstanding debt currently totals nearly $1.7 trillion, according to the Education Data Initiative. Virginia Tech graduate school commencement ceremony Friday, May 11, 2007, in Blacksburg, Va. Virginia Tech graduate school commencement ceremony Friday, May 11, 2007, in Blacksburg, Va. Stephanie Klein-Davis/AP Photo/The Roanoke Times SoLo Funds President Rodney Williams said the increase in Americans turning to community finance platforms to pay off student loans was indicative of wider economic struggles, outlined in the company's '2025 Cash Poor Report." The report found that around two-thirds of cash-poor Americans—those living paycheck to paycheck—were from the Millennial and Gen X age bracket, and 14 percent were African American. Additionally, 40 percent of cash-poor Americans have full-time jobs, and one in every seven cash-poor households earns over $75,000 annually. What People Are Saying Rodney Williams, Co-founder and President at SoLo Funds told Newsweek: "Student loans is an example of another financial expense that they have to withstand. Only a little more than a third of the nearly 43 million people who have student loan debt have made regular payments. This indicates possible variability of income and a strain on budgets. Many Americans are now turning to innovative platforms with less barriers to borrow money for necessities -- not just emergencies which is a positive trend as traditional options are more expensive." U.S. Secretary of Education Linda McMahon, in the April 21 announcement, said: "American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies." McMahon continued: "Going forward, the Department of Education, in conjunction with the Department of Treasury, will shepherd the student loan program responsibly and according to the law, which means helping borrowers return to repayment—both for the sake of their own financial health and our nation's economic outlook." Beth Akers, Senior Fellow at the American Enterprise Institute, told Newsweek: "It is seldom discussed in mainstream coverage of this issue, but there have long been safety nets in place that allow borrowers to make reduced payments that are affordable based on their current income. And when debts remain unaffordable they will ultimately be forgiven. Borrowers looking for that sort of help should go to the Department's website and look for how to enroll in income-based repayment." "Borrowers should immediately contact the servicer of their loan and ask about income-based repayment options," she said. "They will be asked to prove their income and then their payments will be reduced to an affordable level." Robert Kelchen, Head of the Department of Educational Leadership and Policy Studies at the University of Tennessee, Knoxville, told Newsweek: "Student loan repayments have to begin at some point, and they probably should have restarted well before they actually did. But regardless of whether the pause in collections is one year or five, any pause is going to be problematic for students and the companies that service student loans. "People with larger loans can access income-driven repayment plans to help them manage their loans," he added. "I am concerned that servicers and the Department of Education do not have the staff to help students who run into issues signing up for those plans." Student financial aid expert Mark Kantrowitz told Newsweek that the resumption of involuntary collections means "that the defaulted borrower will have less income to pay for necessities." "Of course, borrowers who repay their student loans have less income available to pay for other priorities too," he said. "But, a borrower who defaults on their student loans will have proportionately less income available in part because the collection charges slow the trajectory toward paying off the debt in full." Kantrowitz added that those experiencing long-term financial difficulties should consider switching to an income-driven repayment plan, which reduces the monthly cost by increasing the repayment term to 20 to 25 years. However, he warned that this will increase the total cost of the loan. What Happens Next? The Education Department has urged those struggling with loan repayments to visit to see the available options.

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