{"id":551,"date":"2025-06-11T18:17:08","date_gmt":"2025-06-11T18:17:08","guid":{"rendered":"http:\/\/www.agencywebdesigners.com\/?p=551"},"modified":"2025-06-12T14:27:37","modified_gmt":"2025-06-12T14:27:37","slug":"as-feds-resume-student-loan-collections-states-try-to-catch-borrowers-before-they-sink","status":"publish","type":"post","link":"http:\/\/www.agencywebdesigners.com\/index.php\/2025\/06\/11\/as-feds-resume-student-loan-collections-states-try-to-catch-borrowers-before-they-sink\/","title":{"rendered":"As feds resume student loan collections, states try to catch borrowers before they sink"},"content":{"rendered":"

By Robbie Sequeira, Stateline.org<\/strong><\/p>\n

Over the past few months, Celina Damian\u2019s phone has been ringing off the hook with one bewildered, anxious question after another: \u201cWhat kind of loan is this?\u201d \u201cAm I in default?\u201d \u201cWill the government really take my wages?\u201d<\/p>\n

\u201cSometimes they just don\u2019t know where to start,\u201d said Damian, California\u2019s student loan servicing ombudsperson.<\/p>\n

\u201cI\u2019m talking to borrowers from all ages, from new borrowers to \u2014 I have 80-, 90-year-old borrowers,\u201d she said.<\/p>\n

The federal government last month restarted collections on defaulted loans. State student loan ombudspersons such as Damian have become some of the only sources of contact for worried borrowers lost in a tangle of conflicting information at the federal level about their loan status and repayment options.<\/p>\n

The U.S. Department of Education began collecting on defaulted student loans in May for the first time since the beginning of the COVID-19 pandemic in March 2020.<\/p>\n

Federal student loans issued by the U.S. Department of Education come with fixed rates, set repayment plans and borrower protections<\/a>. Private servicers handle billing, repayment-plan enrollments and defaults.<\/p>\n

More than 5 million borrowers are in delinquency, and nearly 10 million \u2014 about 25% of the federal student loan portfolio \u2014 are at risk of default within months, according to data from the U.S. Department of Education.<\/p>\n

States can\u2019t cancel that debt, but they do register and oversee servicers operating in their states, run ombuds offices, tweak tax rules and offer outreach or limited grants \u2014 actions aimed at reducing defaults and the economic fallout.<\/p>\n

When borrowers default, states will likely feel the economic impact. They might lose tax revenue as home buying stalls. They could end up paying more for Medicaid and social services if borrowers need to rely on them. And students with loan debt may be reluctant to go into lower-paying public-sector work, leading to staffing shortages at state agencies.<\/p>\n

A borrower is considered delinquent after missing a payment to the servicing companies that handle billing, repayment plan enrollments, and defaults.<\/p>\n

Damian\u2019s office, established under California\u2019s Student Borrower Bill of Rights, began as a narrow statutory role but now serves as a hub for outreach, \u201cStudent Loan 101\u201d workshops and escalated complaints to federal agencies.<\/p>\n

Roughly 16 states<\/a> plus the District of Columbia have followed suit, creating ombuds offices to guide borrowers through confusing paperwork and misinformation. Damian believes these ombuds offices should be in every state, as borrowers across the country will likely have similar questions and little help at the federal level.<\/p>\n

\u201cIf you don\u2019t have an ombudsperson or even just a person at the state level who can educate borrowers, that will make a difference,\u201d Damian told Stateline. \u201cThese borrowers are trying to pay, but the system is broken. No other financial product works this way.\u201d<\/p>\n

Student loans became a key issue during last year\u2019s election race, with President Joe Biden blocked by the U.S. Supreme Court in his effort to offer relief to 40 million Americans. In its waning days, his administration did forgive loans for some 150,000 borrowers under previous programs.<\/p>\n

But President Donald Trump opposes most loan forgiveness programs, and\u00a0in May, the U.S. Education Department issued a \u201cDear Colleague\u201d letter to higher education institutions<\/a>, reminding them of their legal obligations to help former students understand repayment responsibilities and access support.<\/p>\n