Consequences of defaulted student loans hit millions of Americans hard
4 Video Views·Jun 20, 2025
SALT LAKE CITY (KUTV) — After a multi-year pause, the federal government resumed student loan collections on May 5, 2025 — and for millions of Americans, the consequences are already being felt.
Roughly 5 million borrowers are now in default after failing to make payments for over 360 days, according to the U.S. Department of Education. For many, this means the possibility of garnished wages, withheld tax refunds, reduced Social Security benefits, and plummeting credit scores.
Danielle Arnone, a Utah mother of two, is among those feeling the pressure. She and her husband, Kevin, paused their federal loan payments during the government-sanctioned forbearance that began during the pandemic in 2020, under President Donald Trump’s first term. When Joe Biden became president in 2021, he extended the pause on student loans until the pandemic officially ended in 2023.
Welcome back in tonight's Eye on Your Money. Paying on defaulted student loans is hitting people hard.
Garnished wages and damaged credit scores are some of those consequences.
Yeah, early this month the government put a hard end to the years-long pause on federal college loan payments.
Christina Flores shows us how many borrowers now stressing trying to pay back those loans
and what to do when your college loans are in default.
Danielle Arnone has a lot on her plate.
She and her husband Kevin have two young children, and like many Utahns,
they're trying to keep up with the fast pace and the high cost of lights.
The cost of everything, of preschool, of groceries, of just gas, getting to and from places.
It can be a little overwhelming.
But now, more stress.
The Arnones are among five million Americans whose student loan accounts are in default.
That number could rise to 10 million in a few months.
Now the federal government says it's time to pay up.
How do you feel about that?
Kind of overwhelmed, kind of a gray cloud in the back of your mind that's always there.
Can you afford to now make that payment?
No, probably not.
The U.S. Department of Education says if you are in default,
your wages, tax returns, or Social Security payments will be garnished.
I think that's scary, right, for students.
They will have a notification 30 days before they reach out to their employer
that their wages will be garnished.
Dr. Jessica Euler is vice president of student access and success at Weber State University.
That's super concerning, because when a student goes into default,
then that can impact their credit scores.
And at this point, now it's going to impact their wages, potentially.
If you're in delinquency, I'd say start paying back immediately.
For some, the credit score damage is serious.
Our credit score dropped almost 150 points.
This year?
This year.
Your credit score dropped, and it's because you haven't been paying on your college loans.
Wow, did you expect that?
No, it kind of was shocking.
It made us kind of sick to our stomachs.
There are several reasons why millions are now in default on their student loans.
One reason, when the government issued the pause on payments,
there was confusing information about what to do next.
And for many, the pause was also a relief from inflation.
I think some people said, well, geez, I can pause these.
I might as well do it.
It's going to give me more cash in my pocket right now.
But then I think there were other people who said, wow, this is really sort of a godsend,
because I don't know how I was going to pay these in the first place.
Tara Alderete is with Money Management International,
a nonprofit that helps people get out of debt.
She says for people who were not paying on student loans,
paying up now could be painful, especially when wages could be garnished up to 15%.
It can be a real downward spiral for folks.
It can really, really affect their overall financial situation.
If you are late on your college loan payments, go to studentaid.gov immediately
and find out where your loan stands.
Then go over your budget to figure out how much you can afford to pay.
The government offers repayment or loan consolidation plans.
You can do it.
I mean, it feels like you can't, and it feels crushing and overwhelming,
and that it is only you, but it's not.
And you can absolutely do it, but you have to start.
We're already cutting down with increased groceries and increased gas
and other things here and there that it's going to be overwhelming.
But we will figure it out.
We have to.
Danielle and her husband will try to consolidate their loan payments to avoid garnishment.
Christina Flores, KUTV 2 News.
And another piece of advice for you, the federal government's consolidation or repayment plans
are still the most affordable option to pay off your loan.
The experts we spoke to say be very cautious about refinancing private loans
or paying off your defaulted loans with a credit card.
That's just more debt.
Those have so much higher interest rates and could also make your situation a lot worse.