(WXYZ) — On May 5, the U.S. Department of Education will restart collections for defaulted student loans. It marks the end of a pandemic-era pause and could lead to serious financial consequences for millions of borrowers.
When collections resume, it's expected to impact more than 5 million borrowers across the country and experts say if your student loans are in default or at-risk, it's crucial to have a plan.
Samantha DeSantis from Clinton Township attended college off and on from 2006 to 2014.
"I grew up with the whole idea that if you go to college, get a degree, you'll get a job and pay off your loans, and you will make a living and happily ever after. That's not what happened, she said.
To pay for school, she took out tens of thousands of dollars worth of student loans. After taking a break from college in 2014, Desantis began repaying the money but realized that would be a struggle.
"I didn't have a degree yet, so I didn't quite have the job that would pay off those loans," she said.
This eventually forced the loans to go into default.
After earning her degree from Central Michigan University in 2021, she was able to improve the situation.
They're now in forbearance until August while she waits to hear if a payment plan is approved.
"I'm kind of in this scary forbearance waiting period where you don't know what's going to happen," DeSantis said.
“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies," Education Secretary Linda McMahon said.
For more than 5 million borrowers in default, this means they could face wage garnishments or withheld tax refunds.
"I couldn't imagine my checks being garnished right now. I can barely make a living as it is," DeSantis said.
Sabrina Calazans, the executive director of the Student Debt Crisis Center, says there's also another 4 million people considered to be in late-stage delinquency.
"That's the phase before you fall into default. So in the next two months, we could see 10 million people in default, which is 25% of the entire student loan portfolio," Calazans said.
Persis Yu is the deputy executive director of the Student Borrower Protection Center.
She says borrowers with worries should go to StudentAid.gov to find out if their loans are in default.
"I know a lot of people are scared right now because maybe they've been in a forbearance, maybe they applied for save, so they haven't been making payments and they want to know, does this even apply to me? So it's important to know what your status is," Yu said.
If you are in default, you're encouraged to go through loan rehab or begin setting up an income-driven repayment plan prior to May 5.
"That is often one of the easiest ways for borrowers to get out of default and into an affordable repayment plan," Yu said.
