NASHVILLE, Tenn. (WTVF) — About 5 million borrowers will have their defaulted student loans sent to collections starting May 5, according to the U.S. Department of Education, adding financial pressure to those already struggling in today's economy.
The Trump administration is moving forward with plans to resume collections on defaulted college loans, which could lead to wage garnishment, bank levies and intercepted tax refunds.
"It's an unfortunate position a lot of people are in and will affect the general public," said bankruptcy attorney Jennifer Johnson.
Johnson of Johnson Legal said student loan debt is one of the most common financial burdens her clients hope bankruptcy can ease.
"Typically in a Chapter 13 bankruptcy while a client is in, their student loans are in forbearance throughout the Chapter 13 plan, which is a three to five-year payment plan," Johnson said.
Forbearance means the loans are paused, but Johnson notes that in some cases, such as borrowers over 65. She's been able to get federal student loans discharged under Chapter 13 or Chapter 7 bankruptcy.
"Another factor is if they've been unemployed in the last 5-10 years. Maybe got the degree they went to score for. They don't have the benefit of the degree but got debt of the degree that they never got," said Johnson.
The Department of Education defines loan default status clearly: "If you haven't paid in 90 days, you're delinquent. If you remain delinquent for nine months, you're in default. Once they're in default, they can refer them over to a collections agency," said Johnson.
The consequences of default can be severe, affecting both immediate finances and long-term credit.
"Having student loans reported to their credit report and even whatever jobs they are able to make ends meet to be garnished on top of that is but of an insult to the financial injury they're experiencing now," said Johnson.
Johnson recommends borrowers explore income-driven repayment plans and prepare financially as soon as possible.
"Do a good list of all the money coming in and make a list of all the expenses going out of the household and see if there are cuts that can be made," said Johnson.
The Education Department said it will contact borrowers in default to inform them of their status and options. Borrowers can also check their loan status and find their servicer by logging onto StudentAid.gov.
Are you concerned about your student loan status or wondering if bankruptcy might be an option for your financial situation? Watch the full video report for more detailed advice from bankruptcy attorney Jennifer Johnson, and reach out with your questions to aaron.cantrell@newschannel5.com.
This story was reported by a journalist and has been converted to this platform with the assistance of AI. Our editorial team verifies all reporting on all platforms for fairness and accuracy.
My friend and colleague Carrie Sharp had a lot of fun last week, on an adventure to a country more than three thousand miles away! She’s back now – sharing her Adventures in Iceland through stories, and incredible images of this remarkably beautiful and unique island nation (kudos to Chief Photographer Catherine Steward)! But did you know Nashville has something very important in common with Iceland? Tourism! Here, Carrie explains how a volcanic eruption decades ago helped save the country’s economy from collapse!
-Rhori Johnston
