Millions of student-loan borrowers are about to be thrown into collections. Some say they're already 'barely scraping by.'

James Southern, 63, decided to go to business school in the early 2000s to further his career.

"I loved the learning atmosphere, I loved the other students, I loved everything about it," he told Business Insider. "But at the end, once I attained what I was reaching for, the rewards have never transpired."

Southern said he made every effort to get a well-paid job that would help him pay off his student loans. He recalls sending in over 50 job applications, without success. During that time, he wasn't able to afford his student-loan payments, and the unpaid interest surged his balance as he fell further behind.

When President Donald Trump's Department of Education paused collections on defaulted student-loan debt at the start of the pandemic, it was a big relief to Southern. Five years later, that relief is coming to an end, and he still can't afford to make payments.

"They're looking at me paying $1,500 a month, and I told them, that's just impossible," Southern said. "I can't do that and function and pay bills and do what I need to do on a monthly basis with that kind of debt structure. I can't do it."

The department gave borrowers two weeks to prepare. Starting May 5, the consequences of default could include wage garnishment and seizure of federal benefits, like a portion of a Social Security check.

BI heard from dozens of student-loan borrowers who are either in default or concerned they will soon default. They said they're fearful of the looming collections and their ability to afford extra payments. While some of them said they want to fulfill their obligations, the sudden announcement leaves them with a short timeframe to make financial preparations.

That's the case for Southern, who now earns a five-figure salary at a security company. While he doesn't regret pursuing an education, all he has is a six-figure defaulted student-debt load to show for it. He's unsure what to do next, and he anticipates the worst-case scenario: The department will take his money, whether he likes it or not.

"If they are steadfast on this $1,500 a month, then again, there's no way I can pay that," Southern said. "So they're going to have to come and take it from me, and then I've got to figure out somehow how to live past that point."

An unfulfilled student-loan forgiveness promise

Holly Bechard, 42, is past due on her federal student loans but not yet in default, according to documents reviewed by BI. She's worried she'll soon enter that phase, and she said that she was hoping for student-loan forgiveness under Biden and is disappointed that that promise was never fulfilled.

Biden announced his first broad student-loan forgiveness plan in August 2022, but the Supreme Court later struck it down following a series of lawsuits challenging the relief's constitutionality. While Biden made a second attempt at relief, it was also met with legal challenges, and his administration was unable to carry it through before his term was up.

"I feel like it's just been very hard to motivate myself to pay them when there was so much talk about forgiving them," Bechard said.

Linda McMahon, Trump's education secretary, wrote in an opinion piece in The Wall Street Journal that the collections restart is intended to restore accountability for student-loan borrowers.

"For political gain, he dangled the carrot of loan forgiveness in front of young voters, among other things by keeping in place a temporary Covid-era deferment program," McMahon wrote. "Thus the Education Department allowed students to rack up a massive debt that is now long past due."

The Department of Education said it would start sending notices to defaulted student-loan borrowers before May 5, notifying them of their default status and urging them to contact their servicers to make preparations to restart payments.

Bechard isn't feeling confident.

"I'm never going to pay them off," she said. "I don't have any problem paying back what I borrowed, but I do have a problem with the lack of transparency and all of the false promises that I feel like the federal government has made to me over the years."

'I'm barely scraping by'

A student-loan borrower enters default once they've been behind on payments for more than 270 days. Biden instituted a one-year on-ramp period that ended in October 2024, during which borrowers who missed payments would be free of credit report hits. That means that this summer, there will likely be a wave of defaults as more borrowers reach the 270-day mark after the on-ramp ended.

Data from the Department of Education said that over 5 million borrowers have not made a monthly payment in over 360 days and are in default, and 4 million borrowers are in late-stage delinquency, having been behind on payments for 91 to 180 days

"As a result, there could be almost 10 million borrowers in default in a few months," the department said. "When this happens, almost 25 percent of the federal student loan portfolio will be in default."

Matthew Green, 36, said defaulting is inevitable. He worked two jobs in college to finance most of his education, but he still had to take out student loans to pay the remainder. After joining the Peace Corps post-graduation, Green developed medical issues and was unable to work, so he fell behind on his student-loan payments.

He now works as a high school custodian, and student-loan payments are not feasible alongside his other monthly expenses.

"I'm barely scraping by just to make ends meet. I'm going paycheck to paycheck, and this is going to kill me," Green said.

He added that he's not "against paying back loans, and it's not the government's fault or the school's fault. That's the way the cards fell. But I don't know what I'm going to do, having to pay back these loans right away. I'm just getting caught up with the bills I hadn't been able to pay in the previous years. So it's pretty scary."

Are you a student-loan borrower in default or concerned about falling behind? Contact this reporter via email at [email protected] or Signal at asheffey.97. Use a personal email address and a nonwork device; here's our guide to sharing information securely.