Trump Student Loan Policies Will Financially Ruin Some New Yorkers

After a five-year reprieve, the Trump administration resumed subjecting student loans borrowers in default to aggressive mandatory collections.

I cannot overstate how destructive this is to New York working people, families and our economy for the federal government to begin garnishing wages and withholding Social Security benefits, tax refunds and other federal payouts. It makes it difficult to buy a house, rent an apartment or get a job.

Thanks to Governor Kathy Hochul and the New York State Legislature, New York is ahead of the curve in protecting student loan borrowers from financial distress, but continued action is essential. The governor’s 2025-26 Executive Budget included funding for the Education Debt Consumer Assistance Program (EDCAP) – the first-in-the-nation student loan consumer assistance program, run by my organization, the Community Service Society of New York. It has become a vital resource for borrowers navigating complex repayment and forgiveness options. 

As more borrowers exit pandemic-era protections and face mounting financial pressures, EDCAP’s support is more critical than ever. If you’re behind on your loan payments, take the first step toward stability. Call EDCAP at: 888-814-5004 or book an appointment online for free, trusted help.

Putting the Squeeze on Working New Yorkers

We should all be horrified at the idea of the federal government unleashing its powerful debt collection machine on the record numbers of Americans behind on their student loan bills. 

Cruelty is the north star of Trump’s second presidency, and dropping the hammer at this time is brutal, just as everyday Americans face price hikes for every day expenses, layoffs and a likely recession this summer as a result of Trump administration tariffs.

All of this is particularly rich coming from a president who doesn’t always pay his bills, went bankrupt six times and himself ran an unscrupulous for profit college.  

The federal government kicked off the crackdown earlier this year by instructing its student loan servicers to start reporting to credit bureaus payers who are 90 days delinquent. The result: defaulted borrowers – as well as millions behind on their loan payments, but not in default – saw their credit scores plunge. 

To add insult to injury, last week the Trump administration proposed a budget that would cut thousands more government jobs and slash funding for housing, food, and education. At the same time, House Republicans have proposed to eliminate income-driven repayment (IDR) plans, PLUS loans for graduate students and parents, and reduce overall aid through changes to the Pell Grant program. IDR plans have helped millions afford payments and avoid default. Under the overhaul, the typical borrower with a bachelor’s degree would pay almost $3,000 more per year versus current government repayment plans, according to the Student Borrower Protection Center. 

Across the state, 2,549,780 borrowers owe an average of $39,340 in student loan debt, according to the Federal Reserve Bank of New York.  The delinquency rate is 11.1 percent, meaning that over 279,000 New Yorkers, many of them Black and brown, are at risk of default and collection activities. 

Among the city’s indebted students, 13.6 percent owe less than $5,000, while 22.7 percent owe an average of $28,287, according to the Education Data Initiative.  That may not seem like a ton of money, but it represents a huge burden on top of rent, childcare, food, commuting costs, health care and other daily necessities in New York City.

The student debt crisis has taken countless twists and turns, beginning with the Covid pandemic.  The policy stopping the U.S. Department of Education (USDOE) from sending accounts to collections first went into effect five years ago, during Trump’s first term. Repayments resumed in late 2023 after some loans were forgiven by former President Joe Biden. Some of his forgiveness programs were overturned by the federal courts. Consequently, more than a few borrowers received incomplete, contradictory or confusing information about their loans.

How Borrowers Can Protect Themselves

A defaulted loan is a loan that a borrower hasn’t made payments for 270 days. When the loan officially enters default, it becomes eligible for mandatory collections. Unlike other debt, there is no statute of limitations on the collection of student loans.  

Here’s what you can do: Check the status of your student loans by logging into your StudentAid.gov or servicer account. If you have past-due statements, call your student loan servicer and request a retroactive forbearance.

To keep your loans in good standing, explore and enroll in a repayment plan that fits your budget. If you cannot afford any repayment plan, you can request a deferment or forbearance as a short-term solution.

If your student loans are in default, contact the debt collector or seek assistance. You can get out of default by consolidating your loans through StudentAid.gov. Your new loan will resolve the defaulted one. Another option is loan rehabilitation, which requires you to make nine monthly payments based on your income. Once completed, your loans will return to good standing. 

No one wants to default on their loans. Unfortunately, the White House attack on student loan holders is forcing some to choose between feeding their families or paying Uncle Sam.

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