Pity the students who have jumped — wholeheartedly and with their bank accounts — into the promise that a college education will pay off financially in the long run. Yes, the statistics do support upside earning potential after investing in college, but the price of higher education can be steep. Much too steep — as many are finding out, as defaults on federal student loans come due.
Next Monday, a pandemic-era pause for federal loan borrowers in default will end — which means collections will be at the doorstep for millions of former and current students nationwide. Unfortunately, that will catch many flat-footed, financially unable to make their payments.
To be sure, for most federal student loan borrowers, monthly payments and interest had already resumed in October 2023. But those in default — who have missed payments for an extended period — were given more time before aggressive collections restarted. That protection will be ending — so borrowers must take action now, if they haven’t already, to address delinquencies.
Nationwide, some 5.3 million borrowers went into default — technically, failure to make a loan payment for at least 270 days — before the pandemic, according to the U.S. Department of Education (USDOE).
But even more borrowers are delinquent, so may be headed toward default. According to USDOE data, 2.9 million borrowers are 61-90 days late on payments, and 4 million more are in “late-stage delinquency,” having been reported to credit bureaus and fast approaching default.
“Most borrowers … they’re not in danger of default today, but in five months, they could be,” Scott Buchanan, executive director of the nonprofit Student Loan Servicing Alliance, told National Public Radio.
In Hawaii, 6,382 undergraduate students in the University of Hawaii system in the 2024 academic year received federal student loans, with the average loan amount for UH-Manoa undergraduates at $6,404; for UH graduate students, federal loans averaged $19,143 per borrower.
The harsh realities of high-cost career education were embodied by Ava Song, a third-year medical student from New York who plans to transfer to UH Manoa’s John A. Burns School of Medicine, so to better manage $180,000-plus in student loan debt. Song told Star-Advertiser reporter Victoria Budiono that she was juggling three part-time jobs alongside her course load, but is looking to return to Hawaii to take advantage of in-state tuition as well as serve this community. Indeed, JABSOM has worked to set up unique opportunities and financial aid packages for homegrown and returning heath-care students — and such supports can be mutually beneficial for graduates and for the community at large that needs such expertise.
Sadly, the issue of expensive higher education has been worsened by whiplashing federal political winds. The previous Biden administration — hoping to offer debt relief in COVID-difficult times, but also fishing for votes — overpromised policies of loan forgiveness, which ultimately got snagged in the courts. All the while, a pause on federal loan payments gave many students a false sense of security. Now, the new administration’s USDOE will resume default collections, an obligation to collect what’s owed on U.S. taxpayers’ behalf. Come Monday, the Federal Student Aid office can start taking funds out of borrowers’ tax refunds, Social Security benefits and eventually wages.
Anyone who’s been payment-delinquent knows that not dealing with debt only compounds problems, quite literally, as interest exacerbates the situation and stresses. Taking corrective action is important — and federal student loan borrowers should know that many legitimate resources and supports can help.
Short of repaying the full loan amount, there are two primary ways out of default, said Betsy Mayotte, president of the Institute of Student Loan Advisors: loan consolidation, which involves paying off defaulted loans with new, lower repayment terms; and loan rehabilitation, in which a borrower must make multiple, consecutive on-time payments of an income- based amount before the loan is taken out of default.
And for those buried under federal debt, Buchanan offered this heartening fact: “The federal student loan program is probably one of the most flexible programs that exists when you borrow money. So take advantage of (flexibility). It’s part of the government program. It’s part of the benefit.”
