Economic hardships are expected to worsen as collections resume for those in default, along with new changes to federal student loan forgiveness programs.
Amy Czulada, outreach and advocacy manager with the advocacy group Protect Borrowers, said student loan debt is the second-highest type of consumer debt after home mortgages.
"We’re expecting a huge default cliff, said Czulada. "So, we're expecting the number of defaults to rise to up to 10 million people for this year, and that's because a lot of the payment pause protections that were in place during the pandemic have ended."
The U.S. Department of Education recently made changes to the federal Public Service Loan Forgiveness program that allow for the denial of forgiveness to public service workers whose employers have a "substantial illegal purpose.”
Critics say the move is an attempt to punish organizations whose views on immigration, race, and other political hot-button issues don’t align with the Trump administration.
The new rule is set to go into effect on July 1, 2026.
More than 600,000 Kentuckians have student loan debt.
The Trump administration’s One Big Beautiful Bill Act has provisions that put new caps on the amounts that borrowers can rely on from federal student loans.
Czulada said people may simply choose not to return to school because they can't afford it, or they'll turn to the private market to make ends meet.
"And these private loans are much riskier," said Czulada. "They have higher interest rates and many fewer protections and no cancellation programs that the federal government offers."
The Louisville Office of Financial Empowerment offers information on how federal student loan borrowers can access cancellation programs and steps to avoid the consequences of default and delinquency.
