Jun 20, 2025
Danielle Arnone, a Utah mother of two, has seen her credit score plunge 150 points this year because she and her husband were unable to keep up with the cost of living and pay back their federal student loans at the same time.
“It was shocking — made us sick to our stomachs,” she told KUTV 2 News in a story published May 28. “The cost of everything — preschool, groceries, gas — it can be overwhelming. Now this? It’s just a gray cloud that’s always there.”
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Arnone and her husband took advantage of the pause on federal student loan payments that began in March 2020. The pause ended in September 2023, however, the previous administration allowed for a one-year grace period to resume payments. Starting in January, past-due accounts were once again being reported to credit bureaus. On May 5, the government resumed collecting defaulted student loan payments.
As a result, on top of taking a hit to their credit scores, millions of borrowers could face wage garnishments, withheld tax refunds and reduced Social Security benefits if loans continue to go unpaid. Here’s what you can do if you find yourself in this boat.
The state of federal student loans and borrowers
The U.S. Department of Education (ED) released some dismal data in April. More than 5 million student loan borrowers had not made a payment in over a year and were in default. A further 4 million borrowers were in late-stage delinquency — meaning that within a few months, nearly 10 million borrowers could find themselves defaulting on their loans.
The ED also noted that 42.7 million borrowers owed more than $1.6 trillion, and only 38% of them were up to date on their student loan payments.
During his term, President Joe Biden sought student loan forgiveness for millions of borrowers, however, many of his initiatives were rejected by the courts. This left many borrowers — who were already struggling with the cost of living — confused and unsure what to do about their payments once the pause was lifted.
“I think some saw the pause as a bit of extra cash, but others saw it as a lifeline — they didn’t know how they were going to make the payments to begin with,” Tara Alderete of Money Management International told KUTV 2 News.
One thing appears certain — student loan borrowers shouldn’t expect any charity under President Donald Trump.
“There will not be any mass loan forgiveness,” the ED said in its April news release.
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Borrowers may be subject to collection activities only after receiving “sufficient notice” and opportunity to repay their loans, according to the ED.
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How to deal with defaulted student loans
Borrowers who are in default may want to start making payments right away to limit any financial impacts. If you’re not sure whether you are in default on your loans, you can check StudentAid.gov for more information on your loan status.
Those who aren’t able to budget for their student loans can explore repayment or consolidation options through the U.S. Department of Education.
Beware of refinancing loans through private lenders or using credit cards, which can come with high interest rates and push you further into debt.
If you’re unsure how to move forward with reducing your debt, don’t be afraid to seek help from a nonprofit agency. Expert advice can help you feel more in control of your budget and your finances.
There are options and help available, even if you’ve been avoiding your student loan payments for years.
“It’s going to be overwhelming, but we’ll figure it out. We have to,” said Arnone.
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Rebecca Holland is dedicated to creating clear, accessible advice for readers navigating the complexities of money management, investing and financial planning. Her work has been featured in respected publications including the Financial Post, The Globe & Mail, and the Edmonton Journal.
