Default, disappear, and then due again. That’s the confusing journey some private student-loan borrowers are facing.
Dozens of borrowers, lawyers, and industry experts spoke to BI’s Ayelet Sheffey about the uncertainty and lack of transparency that can occur when private student loans move toward default.
It’s the first story in a new BI series on the spiral that student debt can send borrowers into.
Multiple borrowers told Ayelet they were notified that their loans had been paid off and that their accounts showed a balance of $0. Only later would they learn that the loans had actually been transferred to a third party and that they were being sued to collect the full balance.
A debt-relief lawyer said this isn’t necessarily a case of wrongdoing on anyone’s part. Instead, it amounts to a lot of crossed wires on top of what is already a complex process. But even if it’s not a legal issue, that doesn’t soften the blow of seeing your debt return with the added bonus of a lawsuit.
Things don’t appear to be getting simpler anytime soon. Starting in July, new borrowing caps and repayment plans for federal loans will go into effect as part of President Donald Trump’s sweeping overhaul of the system.
Ayelet, who has extensively covered student loans, reported that Trump’s changes could ultimately send more borrowers to private lenders.
The White House sees a silver lining. A spokesperson for the Department of Education told BI it believes colleges will lower tuition in response to Trump’s changes.
Higher education’s financing system is becoming more confusing just as confidence in the value of college is weakening.
The debate has raged for years, especially among Gen Z, and AI has only accelerated the conversation. Degrees that seemed guaranteed to land you a job after college — like computer science — don’t appear bulletproof anymore.
On top of the difficulty of financing your degree, it’s an uphill battle getting a job to start paying off your loans.
Even if you’re bullish on the importance of college, it’s tough to predict the degree that gives you the best chance at a job. The speed of AI’s evolution means the tech’s blind spot today could disappear by the time your first student-loan bill comes.
Just don’t bank on your loans doing the same … even if it looks that way.
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