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What factors are contributing to the rise in student loan defaults?
The surge in student loan defaults can be attributed to several factors, including the end of pandemic-related relief measures, which paused payments for federal loans. As collections resumed in May 2025, many borrowers found themselves unprepared to restart payments, leading to record-high delinquency rates. Economic instability and rising living costs have also made it difficult for borrowers to keep up with their payments.
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What can borrowers do to avoid defaulting on their student loans?
To avoid default, borrowers should consider proactive measures such as contacting their loan servicer to discuss repayment options. Income-driven repayment plans can help lower monthly payments based on income. Additionally, borrowers should stay informed about their loan status and explore deferment or forbearance options if they are facing financial hardship.
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How is the government addressing the student loan crisis?
The government is taking steps to address the student loan crisis by providing resources and information to borrowers. The U.S. Department of Education has emphasized the importance of communication between borrowers and loan servicers. Furthermore, there are discussions about potential reforms to the student loan system to make it more manageable for borrowers in the long term.
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What are the consequences of defaulting on student loans?
Defaulting on student loans can have severe consequences, including damage to credit scores, which can hinder future borrowing capabilities. Borrowers may also face wage garnishment and tax refund seizures. Additionally, default can lead to increased financial stress and limit access to financial opportunities.
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What resources are available for borrowers struggling with student loans?
Borrowers struggling with student loans can access various resources, including financial counseling services and nonprofit organizations that specialize in student loan assistance. The Federal Student Aid website offers tools and information on repayment options, while consumer advocates encourage borrowers to seek help early to avoid default.
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What should borrowers know about the current state of student loan collections?
As of June 2025, the student loan collection landscape has changed significantly with the resumption of payments. Borrowers should be aware of their repayment schedules and any changes to their loan terms. Staying informed about their rights and available options is essential to navigate this challenging period effectively.