Last year, I wrote about the mounting risks of student loan delinquency. It was bad then. It is worse now. The American promise was simple: work hard, get educated, and you can build a life. That promise is breaking. Student loans were never just debt; they were the toll you paid for entry into the middle class. Today, millions are paying that toll with their credit scores, their housing stability, and their futures.
After a three-year pandemic pause, federal student loan collections have resumed. Not gradually. Not thoughtfully. Swiftly and without sufficient warning. And the consequences have been immediate. According to the Federal Reserve Bank of New York, more than 3.2 million borrowers saw their credit scores plummet by at least 100 points in the first three months of 2025. A million dropped 150 points or more. The federal government, under new policy direction, has restarted garnishing wages, seizing tax refunds, and even docking Social Security checks. This is not a system of support. It is a system of punishment.
The damage ripples outward. A lower credit score means higher costs for everything from car insurance to credit cards. It can block access to housing and employment. Dom Holmes, a nonprofit worker in Pennsylvania, woke up to find his score had dropped nearly 70 points overnight. He had received no notice, no warning, no explanation. For millions of Americans like Holmes, the return of collections was not a policy change. It was a financial ambush.
For older borrowers, the consequences are even starker. Many took out Parent PLUS loans to help their children attend college. Now they are seeing their own creditworthiness evaporate. Andrew McCall, a 58-year-old from Idaho, put it plainly: “Your credit rating becomes a social stratifier.”
This isn’t just about debt. It is about power. The U.S. student loan system treats borrowers as liabilities to be managed, not as citizens to be supported. And it does so in stark contrast to how other nations approach the same problem. Australia and the United Kingdom use income-contingent repayment models. Payments rise and fall with the borrower’s earnings. There is no credit destruction. No wage garnishment. No threats.
Suze Orman, in her recent column, offered practical advice for those behind on payments: confirm your status, seek rehabilitation, avoid default at all costs. It is good advice. But it cannot fix a broken system.
Student debt has become a slow-motion crisis, accelerating under the weight of indifference. It punishes those who played by the rules. It erodes financial security for entire generations. It exacerbates racial and economic inequality. And it was preventable.
This is not just bad policy. It is a failure of moral imagination. We have allowed education to become a debt trap instead of a public good. We have chosen to punish effort instead of rewarding it. The student loan credit spiral is not the fault of the borrower. It is the fault of a system that forgot what education was for.
We can still correct course. But not by blaming the victims. Not by garnishing wages. And not by wrecking the lives of people who did everything they were told to do.
The first step? Forgive what was never meant to be a life sentence. Then, rebuild the system around dignity, not delinquency. Let education be the beginning of a better life, not the end of creditworthiness.