This will be a multi-part series on what we are seeing out there now, and what we have found is working to meaningfully decrease student loan debt. It has gotten much harder over the past year, but it’s still possible in many situations. As always, you can schedule a Student Loan Strategy Session with us to go over your loan particulars, what options you have and whether you are on the best path forward. We charge for those sessions, and we’ve been told by a lot of borrowers that it was money very well spent. We didn’t break the student loan system, (it’s been broken for a decade at least) but we hopefully will have some insight and advice on how to save the most money and see some light at the end of the tunnel.
We will first address some opportunities in bankruptcy that may be overlooked by most. Then we’ll cover what we are seeing regarding the IDR Recount, forgiveness emails going out now, how to obtain the lowest possible payment for those with Parent Plus loans, and collection news such as whether Social Security is being offset.
Since we are seeing increased defaults, we’ll go over options to consolidate or rehabilitate to cure a loan default and their differences. Finally we’ll do some comparisons between IBR and RAP (RAP doesn’t come out until next Summer), but it’s good planning to know what’s coming and how to best position yourself.
So here goes:
Mortgage lenders are reporting that borrowers with 100-200 point declines in credit scores, as well as those on SAVE (“Saving on a Valuable Education”) forbearances cannot now qualify for home purchases. Collections by the Department of Education (“ED”) restarted May 5, 2025. Garnishments and Social Security offsets will begin this Summer. ED reports on its website that it expects that approximately 25% of its student loan portfolio will be in default in the next couple months.
And interest has re-started on SAVE forbearances starting August 1, 2025. That is important because those borrowers desiring SAVE in the first place, often were attracted by not only the lowest possible payment, but also by the 100% interest subsidy which precluded the accrual of huge amounts of interest.
At the same time, borrowers face an openly hostile administration and populace opposed to student debt forgiveness, an overly complicated student loan repayment system, mass confusion as to available options and difficulty getting to the bottom of things with their loan servicers. Servicers are reporting that all forgiveness programs either have been halted, under an injunction or they are bogged down with a huge backlog for those seeking an available IDR plan.
Servicers are in disarray and the official ED website StudentAid.gov frequently shuts down various online options. ED is in the process of reportedly being dismantled, large numbers of employees have been dismissed, and the Ombudsman program has ground to a halt.
Surprisingly, bankruptcy may come to the rescue for many student loan borrowers.