Over the past few months, Celina Damian’s phone has been ringing off the hook with one bewildered, anxious question after another: “What kind of loan is this?” “Am I in default?” “Will the government really take my wages?”

“Sometimes they just don’t know where to start,” said Damian, California’s student loan servicing ombudsperson.

“I’m talking to borrowers from all ages, from new borrowers to — I have 80-, 90-year-old borrowers,” she said.

The federal government last month restarted collections on defaulted loans. State student loan ombudspersons such as Damian have become some of the only sources of contact for worried borrowers lost in a tangle of conflicting information at the federal level about their loan status and repayment options.

The U.S. Department of Education began collecting on defaulted student loans in May for the first time since the beginning of the COVID-19 pandemic in March 2020.

Federal student loans issued by the U.S. Department of Education come with . Private servicers handle billing, repayment-plan enrollments and defaults.

More than 5 million borrowers are in delinquency, and nearly 10 million — about 25% of the federal student loan portfolio — are at risk of default within months, according to data from the U.S. Department of Education.

States can’t cancel that debt, but they do register and oversee servicers operating in their states, run ombuds offices, tweak tax rules and offer outreach or limited grants — actions aimed at reducing defaults and the economic fallout.

When borrowers default, states will likely feel the economic impact. They might lose tax revenue as homebuying stalls. They could end up paying more for Medicaid and social services if borrowers need to rely on them. And students with loan debt may be reluctant to go into lower-paying public-sector work, leading to staffing shortages at state agencies.

A borrower is considered delinquent after missing a payment to the servicing companies that handle billing, repayment plan enrollments, and defaults.

Damian’s office, established under California’s Student Borrower Bill of Rights, began as a narrow statutory role but now serves as a hub for outreach, “Student Loan 101” workshops and escalated complaints to federal agencies.

Roughly plus the District of Columbia have followed suit, creating ombuds offices to guide borrowers through confusing paperwork and misinformation. Damian believes these ombuds offices should be in every state, as borrowers across the country will likely have similar questions and little help at the federal level.

“If you don’t have an ombudsperson or even just a person at the state level who can educate borrowers, that will make a difference,” Damian told Stateline. “These borrowers are trying to pay, but the system is broken. No other financial product works this way.”

Student loans became a key issue during last year’s election race, with President Joe Biden blocked by the U.S. Supreme Court in his effort to offer relief to 40 million Americans. In its waning days, his administration did forgive loans for some 150,000 borrowers under previous programs.

But President Donald Trump opposes most loan forgiveness programs, and in May, the U.S. Education Department issued a , reminding them of their legal obligations to help former students understand repayment responsibilities and access support.

Some conservative economists  that federal loan forgiveness and financial aid hurt all students, offering colleges an incentive to raise tuition or lower their own institutional aid.

Winston Berkman-Breen, the legal director at the Student Borrower Protection Center, a nonprofit aimed at protecting borrowers and improving the repayment system, said that more than 2 million borrowers are stuck in a backlog of for ( — calculated pay structures meant to keep payments affordable based on a borrower’s income.

Other borrowers have called federal agencies for help only to find that U.S. Education Department staff, , have been laid off as the Trump administration works toward dismantling the department entirely.

“There was an expectation to repay,” Berkman-Breen said. “But there was also an expectation that people would have access to affordable plans. That promise has broken down.”

States now have three primary tools to address student loan debt, Berkman-Breen said: enforcement actions to protect consumers, such as the against servicer Navient; legal oversight by suing to uphold or challenge federal policy; and direct outreach to help public servants access Public Service Loan Forgiveness and similar programs.

Nineteen states now require registration for companies that service student loans, he said. And more than a dozen states align with federal policy to exempt forgiven loan balances from state income taxes.

‘Can’t wait for Washington’

Connecticut state Rep. Eleni Kavros DeGraw, a Democrat, calls student debt “a drag on the economy,” and said states can’t afford to wait for Congress — mired in partisan gridlock over student loan forgiveness — to find common ground.

“[Student debt] is stopping people from buying homes, starting families and fully participating in the economy,” she told Stateline. “That hurts us as a state, as a city, and we can’t wait for Washington to figure it out.”

Last year, Connecticut created a bipartisan that provides up to $20,000 for graduates of local colleges who make payments and complete community service. The state has distributed more than $2 million so far.

Kavros DeGraw hopes the program can serve as a model, and has already talked with lawmakers in other states on possibly developing their own versions of it.

“These were people who were already paying,” Kavros DeGraw said. “It just made sense. I think it’s something that other states could explore this session, and it would provide an immense deal of relief.”

Lawmakers in other states also have considered student loan legislation. This year, New Jersey introduced bills to and cap interest rates. Lawmakers in , and have proposed Borrower Bill of Rights legislation. Arizona has a registration bill for private servicers. None of these measures has advanced far.

According to the National Conference of State Legislatures, more than 20 states have enacted laws expanding loan forgiveness, repayment programs and servicer oversight in recent years.

Several states are also investing directly in workforce-aligned loan forgiveness: Georgia expanded its service-cancelable loan to cover dental students working in rural areas. Idaho created a loan repayment for rural nurses. Kentucky now offers $5,000 to attract new teachers. Maryland authorized Anne Arundel County to launch a local program for public school educators.

Repayment

Student loan stress is not . Seven states, all with Republican‐controlled legislatures, report delinquency rates above 30% among borrowers required to make payments.

Mississippi leads the nation with a conditional delinquency rate of nearly 45% — meaning borrowers who should be making payments are late. That’s just ahead of Alabama, West Virginia, Kentucky, Oklahoma, Arkansas and Louisiana, all of which have rates above 31%, according to recent data from the Federal Reserve Bank of New York.

By contrast, Illinois, Massachusetts, Connecticut, Vermont and New Hampshire maintain delinquency rates below 15%.

Experts say this chasm reflects deeper systemic differences, such as lower median incomes in higher delinquency states, along with weaker consumer protections and a higher share of students attending for-profit institutions or leaving college without a degree.

States also have promoted the federal Public Service Loan Forgiveness program, established in 2007, that offers help to public service professionals. New Mexico has an outreach campaign that includes and health care workers. Maine has provided to public defenders on how they can take advantage of the Public Service Loan Forgiveness Program and touts a related state tax credit on a marketing to lure new residents.

“States can regulate and enforce, but they can’t fix the structural problems in how repayment is administered,” said Michele Zampini, senior director of college affordability at The Institute for College Access & Success, a research organization that advocates for students. “They’re helping around the edges, but the core system is still broken.”

A November from the Consumer Finance Protection Bureau found at least 3.9 million borrowers received misleading or inaccurate bills from servicing companies.

“The repayment system is not in a good place to provide the services and repayment options borrowers are legally entitled to,” Zampini said.

The Student Loan Borrower Survey, conducted between October 2023 and January 2024, found that 61% of borrowers who received debt relief made a beneficial life change earlier than they otherwise could have. Yet borrower awareness remains dangerously low: Nearly 42% of federal borrowers have only been on the standard repayment plan, and 31% of those didn’t know other options, such as an income-based plan, existed.

In California, a major part of Damian’s job in the past few months has been to help borrowers access existing forgiveness programs.

Meanwhile, new federal policy proposals could reshape repayment entirely. The Trump-backed would consolidate existing IDR plans into a single tiered structure, with lower-income borrowers paying flat monthly rates and higher earners contributing 8% of their income. The bill also proposes extending standard repayment terms to 30 years — raising concerns it could delay forgiveness and inflate total interest costs.

The bill passed the U.S. House and is pending in the Senate.

‘Incentive to hike prices’

Andrew Gillen, a Cato Institute research fellow who recently testified before Congress, argues that any meaningful fix must address the incentives driving rising tuition — namely, federal aid being tied directly to college sticker prices.

“The link between rising tuition and increasing aid is what drives the Bennett Hypothesis, where federal student aid, in the form of loans, can lead to higher tuition costs at colleges and universities,” Gillen said in an interview. “If we instead use the median cost of attendance to calculate aid eligibility, we remove colleges’ incentive to hike prices just to capture more aid.”

Even without agreement on blanket forgiveness, experts agree on smaller bipartisan steps: streamlined repayment, stronger servicer oversight and targeted help for borrowers with the greatest need.

“We don’t want people defaulting. We don’t want payments that are too high for people just out of school. That should be the bipartisan starting point,” Zampini said.

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Cortez Masto’s was the lead signature on by 14 senators to Department of Education Secretary Michael Cardona. Fellow Nevadan Sen. Jacky Rosen also signed.

An estimated 200,000 service members now owe more than $2.9 billion in student loans, according to the senators’ letter.

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“Many of them planned their financial futures around the promise of eventual student debt relief,” the senators wrote. “However, a recent Government Accountability Office report indicated that approximately 94% of service members and civilian employees of the U.S. Department of Defense who previously applied for relief through the program have been denied.”

In October, the U.S Department of Education announced it would overhaul the Public Student Loan Forgiveness (PSLF) program, which promises to forgive the remainder of a borrower’s federal student loans, if that borrower worked for 10 years in the public or nonprofit sector and made qualified income-based payments during that time. The PSLF program has proven cumbersome for borrowers to navigate and has , once reported as around 2%.

As a part of those announced changes, service members were allowed to count months spent on active duty toward PSLF, even if their loans were on a deferment at the time.

President Donald Trump first paused student loan payments during the pandemic, and President Joe Biden extended that pause . Biden has indicated it will not be extended further.

Progressive Democrats continue their of up to $50,000 in student loan debt per borrower and many want Biden to act through executive order. Biden has pushed back, saying he would support $10,000 in forgiveness if approved by Congress. He has instead implemented more targeted efforts, including cancelling millions of dollars of debt for students of predatory for-profit colleges and people with disabilities.

Student loan forgiveness is not part of the sweeping social policy bill being discussed in Washington DC.

is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Nevada Current maintains editorial independence. Contact Editor Hugh Jackson for questions: info@nevadacurrent.com. Follow Nevada Current on and .

Loans were repeatedly described as a “lifetime sentence” in interviews with 100 degree holders. For those enrolled in income-driven enrollment plans that stretch on for upwards of 20 years, growing balances are “shackles on their ankle,” and “like Jim Crow,” with virtually no chance of total repayment.

Health scares, job insecurity and refinancing homes or vehicles with high debt-to-income ratios have derailed borrowers’ futures and compounded stress, according to the , “Jim Crow Debt: How Black Borrowers Experience Student Loans”. Many feared the only way out from under would be, “taking it to my grave” or “when I die.”

Many of the 1,300 Black student loan borrowers are unable to access economic freedom because of their debt. An overwhelming majority cannot sustain savings, according to the advocacy nonprofit.

The majority, 66 percent, regret taking loans in the first place. Only in income-driven plans — of 2 million who’ve made payments for over 20 years — have ever had loans cancelled.

It’s been that Black students — who because of , are unable to tap into generational wealth — borrow more and repay at slower rates than peers of other races. 

This report is the first national look at the day-day toll that debt has on Black families. 

It’s also the first to explore borrower-identified policy solutions, like doubling federal Pell Grants, lower interest rates and realistic debt cancellation. 

“This is not about individuals making the wrong choices, because they didn’t have good choices to make,” said Victoria Jackson, Education Trust’s federal and state policy lead on college affordability.

Attempting to get loans forgiven through existing programs is also nearly impossible, graduates say.  

One borrower, named Georgia for anonymity, took out $24,000 in 1990 and owes $125,000 today.

“I have worked at a nonprofit for 27 years and have tried to work with my multiple loan servicers to get public service forgiveness. I only get the runaround,” said Georgia, who like 72 percent of those surveyed by the Education Trust, is enrolled in an income-driven plan. 

“I tried the Department of Education, my Congress members,” she said. “I am 62 years old and do not know how I will retire.” 

Researcher and co-author Jailil Mustaffa Bishop said student loan policy debates are always “based on Black people’s data, but not really involving actual Black people. We weren’t hearing how Black borrowers were framing their problems and expressing the solution.”

Whether by coincidence or fate, the timing of their project “collided” with national discussions around debt cancellation and the urgent need to reform college affordability.

No ‘good choices’: How policy enables a lifetime of debt

Like many other borrowers, Georgia, struggling to retire, said she received confusing information as to which loans qualified for public service forgiveness or income-driven-repayment. 

With lower monthly payments and cancellation promised after about 25 years, she chose an IDR plan. Thirty-one years later, she has not had any student loans forgiven and her balance has compounded. 

Her experience mirrors that of 2 million borrowers who’ve . A mountain of red tape and convoluted paperwork stands to keep borrowers in “lifetime sentences.” 

Intended as a temporary strategy to help borrowers pay down balances post-college, IDR plans rolled out in 1995. Borrowers pay smaller balances, based on income, and debt spreads out over 20-25 years as opposed to the original 10. 

Once borrowers are back on track, perhaps with higher paying career moves years after graduating, they can go back to standard payment plans. 

But getting “back on track” to paying off the original loan has proven impossible, particularly for Black borrowers, with mounting costs of living, racial wealth gaps and stagnant wages. 

“[An IDR plan] provides immediate relief, but it doesn’t offer a solution to borrowers who are looking at a potential lifetime death sentence, as many Black borrowers in our study described … It just offers a way for them to kind of manage that debt, but not really a solution to pay it off,” co-author Bishop said.

Today, IDR is touted as the primary solution to the student debt crisis, over cancellation or forgiveness.

Yet those in IDR plans rarely see balances go down, only mount with interest. The high debts harm borrowers’ chances of buying homes, renting apartments or accessing credit lines — even more so than those with typical student loan plans. 

“Those in the study that were actually enrolled in an IDR plan … more frequently reported that loans were a source of financial stress. They had a negative impact on their overall mental health, as well as a negative impact on their quality of life,” Education Trust researcher and report co-author Jonathan Davis said. 

About a third of graduates surveyed even postponed having a child because of their student loan debt; about half have put off retirement savings. 

Even more striking, 67 percent of those earning $75-100,000 delayed buying a home because of their student loan debt. The number is nearly just as high, 61 percent, for those with graduate degrees, in theory, better positioned in their careers.  

Chronicling the human toll behind current federal loan policies, the report makes the case for race-conscious reform. 

The future of loan policy, as told by borrowers

“I mean, realistically, I think the [student loan] system is working exactly as we expect it to … no one’s surprised that we somehow built a financial aid process and policy and set that up to only consider your annual salary, as if [Black people] all have the same net assets,” one borrower said.

First and foremost among the solutions, with 80 percent surveyed in support, is wide scale debt cancellation. 

Researchers told ����Ӱ�� that when it came time for cancellation through IDR plans or public service loan forgiveness — which — Black borrowers were often disqualified because of technicalities.

Jalil Mustaffa Bishop said the administrative process is intentionally difficult, similar to bankruptcy filing. 

“There’s a lot of clauses, really it means that a borrower has one misstep that may derail their whole repayment strategy. And that’s also a part of the design … that was built into student loans to make it really hard to get from under this debt. We should see that as a decision that was made, not just kind of an accident that came into being.” 

Common proposals cap forgiveness at $10,000 or suggest “means-testing”, or limiting who is eligible, for example, to those making under $100,000. Yet Black graduates experience greater wealth gaps and higher debt than any of their peers. 

Limits or caps on forgiveness would “disproportionately exclude Black borrowers.” They’re more likely to have high balances and take on graduate school debt to “hedge against discrimination” in the workforce, the report cautions. They’re also least likely to amass wealth long term because of systemic racism. 

Four years after graduation, Black graduates typically owe as white graduates — a result of racial , and needing more in loans because of generational wealth gaps.

Borrowers and , currently capped at $6,495 annually. The increase would entirely eliminate the need for federal student loans for about 75 percent of families living in poverty, and 85 percent of low-income Black families.  

For years, funding declines drove up university tuition as wages stayed stagnant. Accordingly, fewer and fewer families can afford higher education.

And “the purchasing power of the Pell Grant, the nation’s most important college grant, has declined significantly,” Education Trust policy expert Jackson said.

The National Study on Black Student Loans research team will roll out more reports on specific populations and issues within the student debt crisis, like Black women and parent borrowers. They’re also in the process of building a data hub for students, policymakers and advocates to explore research, solutions and students’ lived experiences. 

Black borrowers’ experiences also point to a need for transparent loan counseling, particularly when facing income-driven plans that compound for decades with lower monthly payments.

“We still found that those in plans — that by design are supposed to help you better manage your loan repayments — are unable to afford basic necessities like food, rent, healthcare, contributing to saving, childcare… We want to humanize that. While these plans by intent were designed to do one thing for black borrowers in our study, they have not yet proved to meet that intention,” report co-author Jonathan Davis said.

Disclosure: Marianna McMurdock was an intern at the Education Trust-West in the summer of 2020.