Arizonans react to collections resuming on defaulted student loans
PHOENIX (AZFamily) — The roller coaster ride for people with student loan debt has taken another twist and turn. The U.S. Department of Education announced it is resuming collections on any federal student loan in default, for the first time in five years.
Currently, in Arizona, there are roughly 920,000 borrowers with student loan debt, totaling around $3 billion, according to Yrefy.
Gabriella Fernbaugh is a senior at ASU, who will graduate with tens of thousands of dollars in student loan debt.
“When I started college, it’s not something you think about,” said Fernbaugh. “You think about your dreams and future, and when it comes to graduating, you owe like $1,500 a month.”
For the past five years, student loan debt has been in a state of limbo, with former President Biden trying to cancel student loans for millions of borrowers, only to have his plan rejected by the U.S. Supreme Court. Now, the Department of Education will resume collections on defaulted federal student loans for the first time since the pandemic, starting May 5.
Sent to collections? Here’s what you need to know.
Kimberly Callan is a Phoenix mortgage broker who says student loans are not much different from buying a house; you sign a contract to get a loan, which you agree to repay.
“If you sign on the dotted line, you’ve given a guarantee that you’re going to pay back the creditor who gave you the money,” said Callan. “Yes, for me, student loan debt is exactly the same thing.”
The Federal government will begin the collection process with anyone in default on their student loan, which means borrowers could have their paychecks, tax refunds, pensions, or social security payments garnished to pay off their debts.
Jack Wallace is the director of government and lender relations for Yrefy. He said it’s important for anyone with student loan debt to set up a payment plan by visiting studentaid.gov.
“If you haven’t consolidated loans, most people have multiple loans, go consolidate your loans,” said Wallace. “If you haven’t gone into an income driven repayment program, sign up for one. You can see their calculator to see which one works for you and also what monthly payment would be.”
Some current and former students insist that, with the economy struggling, this isn’t a good time to crack down on student loan debt.
“I think these loans should be forgiven,” said student Isa Martin.
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