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Student Loans Cripple Millions After Pandemic Pause
21 Jul
Summary
- Millions of borrowers face defaulted student loans after pandemic pause.
- Bankruptcy often fails to discharge student loan debt.
- Changes to repayment plans increase borrower burdens.
The number of borrowers with defaulted federal student loans has surged by over 4.2 million recently, with millions more at risk. This crisis follows the expiration of pandemic-era payment suspensions in fall 2024, leading to a sharp increase in defaults after nine months of missed payments.
Ashley Dreahn, a 40-year-old from Texas, found her defaulted loans had ballooned to $94,298, despite believing they were discharged in bankruptcy. Her experience underscores the difficulty of discharging student loans through bankruptcy, which typically requires proving "undue hardship."
Borrowers facing default experience severe consequences, including damaged credit ratings and potential wage garnishment. Experts report widespread despair and outrage among those affected by the student loan system's complexities and recent changes.
Many borrowers struggle with evolving repayment plans, like Shannon Khan, whose payments are set to nearly double. The Education Department is attempting to simplify a fragmented system, but these changes, including dismantling the SAVE plan, are causing financial distress for millions.
