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As feds resume student loan collections, states try to catch borrowers before they sink

Published

2 months ago

June 6, 2025

westvirginiawatch.com – Robbie Sequeira – 2025-06-06 05:00:00

by Robbie Sequeira, West Virginia Watch
June 6, 2025

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 fixed rates, set repayment plans and borrower protections. 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 16 states 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 “Dear Colleague” letter to higher education institutions, reminding them of their legal obligations to help former students understand repayment responsibilities and access support.

These borrowers are trying to pay, but the system is broken. No other financial product works this way.

– Celina Damian, California student loan servicing ombudsperson

Some conservative economists say 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 unprocessed applications for income-driven repayment (IDR) plans — 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, including servicer-oversight teams, 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 39-state lawsuit 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 reimbursement program 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 register education lenders and cap interest rates. Lawmakers in New Mexico, New York and North Carolina 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 program to cover dental students working in rural areas. Idaho created a loan repayment incentive for rural nurses. Kentucky now offers $5,000 stipends to attract new teachers. Maryland authorized Anne Arundel County to launch a local forgiveness program for public school educators.

Repayment

Student loan stress is not evenly distributed. 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 prospective teachers and health care workers. Maine has provided guidance 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 site 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 report 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 One Big Beautiful Bill Act 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.

Stateline reporter Robbie Sequeira can be reached at rsequeira@stateline.org.
]

Stateline is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Stateline maintains editorial independence. Contact Editor Scott S. Greenberger for questions: info@stateline.org.

GET THE MORNING HEADLINES.

West Virginia Watch is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. West Virginia Watch maintains editorial independence. Contact Editor Leann Ray for questions: info@westvirginiawatch.com.

The post As feds resume student loan collections, states try to catch borrowers before they sink appeared first on westvirginiawatch.com

Note: The following A.I. based commentary is not part of the original article, reproduced above, but is offered in the hopes that it will promote greater media literacy and critical thinking, by making any potential bias more visible to the reader –Staff Editor.

Political Bias Rating: Center-Left

This article presents a largely factual and detailed overview of the student loan repayment crisis, emphasizing the challenges faced by borrowers and the complexity of the federal repayment system. It highlights criticism of federal policies and administrative shortcomings, often reflecting concerns aligned with progressive critiques of government inefficiency and the burden of student debt. However, it also incorporates conservative perspectives, such as the Cato Institute’s view on the unintended consequences of federal aid on tuition costs, and mentions bipartisan efforts toward reform. The tone is measured and policy-focused, showing a slight leaning toward advocacy for borrower protections and systemic reform, typical of center-left reporting.

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News from the South - West Virginia News Feed

Cops, EMS, jail bills and more: How WV localities spent their first share of opioid settlement funds

Published

2 days ago

July 22, 2025

Staff Editor

westvirginiawatch.com – Caity Coyne – 2025-07-22 05:00:00

by Caity Coyne, West Virginia Watch
July 22, 2025

More than half of the opioid settlement dollars spent by localities across West Virginia last fiscal year went to law enforcement, according to a West Virginia Watch analysis of a local spending report published by the West Virginia First Foundation last week.

According to the report, about $72.8 million in opioid settlement funds were disbursed to 226 local governments across the state. Of those local governments included in the report, 144 disclosed not spending any money. Sixteen other local governments did not return their spending reports to the First Foundation and are not included in this analysis.

The money disbursed to and spent by localities only accounts for the first opioid settlement allotment, covering the period between July 1, 2023 and June 30, 2024.

About 9.4% — more than $6.9 million — of the total $72.8 million received over that time was reported as being spent.

A majority of those funds — more than $3.64 million, or 52% — went to law enforcement. The second and third highest categories of spending were for quick response teams in the state, which received about $685,000, and first responders, which got about $643,000. That equates to 10% and 9% of all spending respectively.

Jail bills were the fourth highest expenditure for localities as nearly $520,000 was spent by counties paying them off.

Overall, the fifth highest spending category for the local settlement dollars was for treatment, rehab and recovery initiatives. About $444,200 was spent on these services, equating to about 6% of all money spent.

Read on below for more details on all of these spending categories and more in order of how much was allotted to them. Be sure to read the sidebar to this story for important caveats and information on both the spending report and West Virginia Watch’s analysis of it.

All the spending disclosed in this report was self-reported by the localities to the West Virginia First Foundation. The First Foundation, which is the private nonprofit that was created in 2023 to disburse the state’s share of opioid settlement dollars, has no control or power over how local governments spend their share of the funds.

Appropriate uses for the opioid settlement funds are dictated by guidelines that were set through the court system and approved by the state attorney general in the state’s memorandum of understanding for spending the funds in 2023. Read here for more information on that MOU.

The spending detailed in last week’s report is somewhat preliminary. Some localities did not explain their expenditures. It’s likely that there could be amended reports published by the First Foundation if more information becomes available.

West Virginia Watch contacted every local government where expenditures were either unexplained or incomplete, meaning some additional information has been added for the analysis that is not included in the First Foundation’s published report.

After gathering this information, about $134,000 that was reported by localities as being spent is still unaccounted for. The unaccounted for dollars are largely categorized as “other” spending.

Law enforcement takes lion’s share of local dollars

Local governments spent more than five times as much on law enforcement and law enforcement-related investments than on any other expenditure, according to the spending reports.

Allocations to law enforcement totaled about $3.64 million of all the money spent last year. Nearly a quarter of that spending — about $888,000, or 24.4% — went toward purchasing new police vehicles.

In total, at least 22 vehicles were purchased for 12 different law enforcement agencies throughout the state. Most vehicles were purchased from local car dealers, according to the reports.

Some cars were purchased for new officers that were also hired by law enforcement agencies using settlement funds.

In total, about $817,000 was used by localities to cover salary increases for police officers, the creation of new roles in different types of response teams (i.e. a K-9 unit, a drug task force, etc.), existing police payroll, payroll taxes or new fiscal incentives and bonuses for officers.

At least three law enforcement agencies — St. Mary’s Police, Vienna Police Department and the Wirt County Sheriff’s Office — received funds to purchase dogs for new K-9 units. That spending totaled about $42,000, per the reports.

About $39,000 was spent by five local governments — Granville, Hinton, Lewisburg, Richwood and Oceana — on new firearms and ammo for police, according to the reports.

Communications, infrastructure and security upgrades — including new radios, mobile units, security cameras, drones, licensure for GIS mapping software and more — were the highest expenditure for law enforcement, totaling nearly $1.1 million.

About $177,000 of that spending came from Monroe County, where leaders put the money toward a new “jail reimbursement fund” which could also pay for overtime compensation and more for local officers in the future

The largest single line item expenditure for law enforcement came from the city of Princeton, which paid itself about $352,000 as “restitution for past expenditures on opioid abatement and law enforcement.”

While a total of $434,000 was spent on training for police officers, nearly all of that spending — about $430,400 — was by Jackson County to purchase land for a “Law Enforcement Training Center” and build a new shooting range for officers. Other training included about $2,600 in Fayetteville, where the city reimbursed itself for previous medical and first aid courses given to officers, and $750 in Paden City, where officers took a “street crime class.”

QRT and EMS investments combined total nearly 20% of all spending

Investments in quick response teams throughout the state totaled $685,000. Quick response teams are often a mix of law enforcement officials, counselors, peer coaches and first responders who contact individuals after an overdose occurs.

They work to ensure people are recovering from overdoses while building connections to help them get into rehab or meet other immediate needs that could be exacerbating their substance use disorder.

In Boone County, officials paid $25,000 for the county QRT to buy a new vehicle to help transport clients to treatment facilities. Charleston paid about $500,000 to cover salaries for two QRT positions that were previously covered by a grant that lapsed in 2023. The city also invested in hiring a mental health coordinator to help people facing mental health challenges navigate their options.

Cabell County and Jackson County gave $125,000 and $35,000 respectively to support their QRTs.

Spending for emergency medical services in the state focused largely on financial support for often under-funded and under-staffed volunteer fire departments as well as replacing outdated equipment and purchasing new tools to help first responders treat patients.

The Mingo County Commission spent a total of $275,000 giving $25,000 grants to 11 volunteer fire departments within the county.

Mullens, St. Albans and Oceana used some of their funds to buy new ambulances and fire trucks for county response teams. Several localities used a portion of their funds — totaling about $161,000 — for medical and training equipment for responders.

Three counties focus on oversized jail bills

Jail bills are charged to each county annually. The total amount charged depends on the number of incarcerated people from each locality that are being held in regional jails. In 2022, jail bills cost the state’s 55 counties a total of $45 million, with many local governments listing the charge as their largest annual expense.

Each county pays its jail bill at the same rate, but the totals differ depending on how many people from a county are being held at a regional jail. Until 2023, a cap was in place that limited the amount each county would be charged per an inmate at $48.25 per a day.

Without the cap, the cost for each person held in a regional jail is $54.48 per a day.

In 2023, when localities started to learn more about how much money they would receive through opioid settlements, concerns swirled that — due to how burdensome these jail bills are — many would put their allotments toward getting ahead on the recurring costs.

According to spending reports, three counties — Clay, Grant and Upshur — moved ahead with using their allocations for jail bills.

Clay County used its total 2024 allotment — about $229,550 — on the jail bill. Grant County spent $115,500 of its total $310,400 fund and Upshur County spent about $174,000 of its $348,000 on their jail bills. Those were the only expenditures made by all three counties last year.

Rehab, recovery and treatment see limited investments

Most of the money spent by localities on rehab, recovery and treatment efforts went as donations toward existing entities.

Cabell County had the largest expenditure for rehab, recovery and treatment, sending $200,000 to the nonprofit Lily’s Place for a program that provides housing to mothers and those expecting children as they go through recovery.

That investment accounted for 45% of all spending across the state on recovery and treatment efforts, per the reports.

The second largest expenditure for these categories came from Sistersville, where officials sent $85,000 to the New Beginnings Recovery Clinic so the organization could provide transport for patients receiving treatment.

Other nonprofits receiving funds for rehab, recovery and treatment include: $10,000 from Marion County to Compassion Central for the establishment of a recovery home, $27,600 from South Charleston to Pollen8 to help pay for administrative overhead and salaries and $10,000 from Ceredo to Recovery House of West Virginia for general program support.

Three day report centers in Hardy, Monroe and Pendleton counties received a combined total $82,000 from their county officials to go toward general program support.

GameChangers takes brunt of spending for youth services

More than half of the total $413,500 given by localities to programming for kids in West Virginia in fiscal year 2024 went to West Virginia GameChanger, a politically-connected program established in 2018 to teach prevention to kids in the classroom.

GameChanger received $270 million for programming from Marion County and $10,000 from Mason County. According to reporting from students at West Virginia University, other counties — Harrison, Jackson, Marshall and Mingo — also gave some of their opioid settlement funds to GameChangers.

Harrison and Marshall reported no spending for FY 2024. Mingo and Jackson did not list GameChangers as a recipient of funds. These counties could have used their second allotment of opioid dollars — given in January 2025 — for the expenditure.

GameChanger is based on school boards or individual schools paying a varying fee for prevention materials and a curriculum that experts have called questionable and based in fear, which are not conducive to lowering rates of drug use or overdose among students.

Behind GameChanger, the largest expenditure for youth services last year was given by the Hardy County Commission to Moorefield Athletic Boosters. According to the report, the $60,000 line item went toward repairs at Moorefield Middle School’s track. In the county report, officials said the repairs limited the risk of injuries on the field and that increased accessibility for the entire community could help build healthy habits instead that make substance use disorder less likely to develop.

Other child-focused kid programming from localities included: $10,500 for the June Harless Center’s Imagination Library, a childhood literacy program, from Hardy County ($5,000), Moorefield ($5,000) and Wardensville ($500); $10,000 by Oceana to put on a “Say No To Drugs” show as well as a “drug awareness special needs fishing tournament”; $10,000 from Bluefield for purchase of land to create a youth summer camp and numerous small donations to local nonprofit organizations.

Local governments use settlement funds to keep afloat

The outlined uses for opioid settlement funds are, generally, broad. In West Virginia, where several local governments run on shoe-string budgets, two localities — Oceana, in Wyoming County, and Williamson, in Mingo County — opted to use portions of their settlement funds to keep operations afloat.

In Williamson, officials transferred about $133,200 from its opioid settlement to the city’s general fund to “pay bills and make payroll.” It’s unclear if those funds were paid back and officials with the city could not be reached for comment. Williamson reported spending a total of $173,230 of its settlement fund last year, however no explanation was given on the report for the remaining $40,000.

In Oceana, the town reported three transactions — one for $8,000, another for about $26,300 and a final one for $32,200, totalling nearly $66,500 — transferring money from the opioid settlement fund to the town’s general fund. The money, according to the report, “covered a temporary shortage for the town.”

The first two transfers, per the spending explanation, were paid back following the end of FY2024. The $32,200 transfer is in the process of being repaid. Another $4,120 transfer was made, however according to the report it was accidentally transferred and has also been paid back.

Bank fees, nonprofit donations, infrastructure and more

A mix of uncategorized or small payments make up this final category, which totalled $205,200 accounting for a mix of bank fees, infrastructure projects, nonprofit donations, unaccounted spending and more.

Fourteen localities spent a combined total of nearly $1,400 on bank fees for opening the opioid accounts as well as ordering checks to disburse funds.

Mineral County gave $6,000 to its Family Resource Network for funding its portion of a federal Substance Abuse and Mental Health Services grant. The program, per the spending explanation, will help with substance abuse prevention service across the community. Given cuts and changes at the federal level, however, it’s unclear how long the federal program will exist to help offer such services.

Other general support donations included: $57,000 from Logan County to the Marjorey Oakley Home For Women, $25,000 from South Charleston to Heart and Hand Outreach Ministries for the hiring of a social worker and $10,000 from Marion County to the North Marion Talking About Consumption of Substances Program.

In total, $133,716.68 of funds that local governments reported as spending were unexplained in the report and, therefore, considered unaccounted for at this time.

The post Cops, EMS, jail bills and more: How WV localities spent their first share of opioid settlement funds appeared first on westvirginiawatch.com

Political Bias Rating: Center-Left

This content takes a detailed, investigative approach to the allocation of opioid settlement funds in West Virginia, emphasizing the substantial share directed toward law enforcement and the comparatively smaller investments in treatment and recovery. The focus on scrutinizing law enforcement spending, highlighting funds used for police vehicles and jail bills, and mentioning a “politically-connected program” with a critical tone toward prevention efforts suggests a perspective inclined toward questioning the prioritization of punitive measures over public health approaches. While it remains factual and data-driven, the critique of law enforcement priorities and the call for more recovery-focused funding aligns with Center-Left values emphasizing social services and reform over strict law-and-order spending.