Five million defaulted student loans are being sent back into collections, and experts warn this could be “tragic” for borrowers. Starting May 5, the Education Department will resume collecting debts from defaulted borrowers, which has been paused since the onset of the pandemic, including those who defaulted pre-pandemic.The move follows mass layoffs at the Federal Student Aid office by the Trump administration, leaving fewer staff to help borrowers access repayment plans or loan forgiveness. Former Under Secretary of Education James Kvaal warned the reduced support could worsen the impact of default, which can damage credit scores, block future aid, and even lead to revoked driver’s licenses in some states. While this affects borrowers of all ages, young people may be hit especially hard: according to YPulse, 23% of 18-24-year olds and 18% of 25-39-year-olds already paying off their students loan debt, spending an average of nearly $400 a month on it. Involuntary collections could push young borrowers further behind financially at a time when many are already grappling with high housing process, inflation, and economic uncertainty. (ABC News)
👀 Read more from YPulse: What Kinds of Debt Do Gen Z and Millennials have?
