To repay their student loans, more and more Americans are taking out loans from third parties

US: An increasing number of Americans are requesting loans from third parties to repay their student debts due to persistent economic instability and the recent start of federal loan collections. At SoLo Funds, a peer-to-peer lending platform, users have requested help repaying their debts 12 percent more often in 2025 than they did the previous year. Co-founder and president Rodney Williams said, “We only expect that number to go up.”

The nation’s student loan debt serves as a stark reminder of the wider financial burden that many Americans are experiencing, which is predicted to become worse through 2025 as recessionary worries start to surface. The start of student loan collections, which likely include income garnishments, may soon put defaulting borrowers in even more financial hardship.

This Monday, the federal government began collecting student loans again after a five-year pause that was implemented at the start of the COVID-19 epidemic. The “Treasury Offset Program” would enable the government to deduct Social Security payments, seize tax refunds, and take salaries to pay down stos in addition to voluntary repayment programs.

The Department of Education reports that almost five million borrowers have fallen behind on their loan payments for more than a year, and millions more are in “late-stage delinquency.” Ten million might soon be in default and be the target of forced collection attempts, it said.

According to the Education Data Initiative, 43 million Americans are projected to be in debt from student loans, with a current total of around $1.7 trillion.

According to Rodney Williams, president of SoLo Funds, the rise in Americans using community finance platforms to settle student loan debt is a sign of broader economic difficulties described in the company’s “2025 Cash Poor Report.” According to the research, Millennials and Gen Xers made up around two-thirds of Americans who were cash poor, or living paycheck to paycheck, and 14% of them were African Americans. Furthermore, one in seven cash-poor families makes more than $75,000 a year, and 40% of cash-poor Americans work full-time jobs.

“One more financial expense that they must endure is student loans,” Rodney Williams, co-founder and president of SoLo Funds, told the media report. Of the approximately 43 million individuals who owe money on their student loans, only slightly over one-third have made consistent payments. This data suggests that revenue may fluctuate and that budgets may be under pressure. Since conventional solutions are more costly, more Americans are now using creative platforms with lower obstacles to borrow money for essentials rather than simply crises.

According to the statement made on April 21, U.S. Secretary of Education Linda McMahon said that “American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies.”

McMahon went on, “Going forward, the Department of Education, in conjunction with the Department of Treasury, will shepherd the student loan program responsibly and according to the law, which means helping borrowers return to repayment—both for the sake of their own financial health and our nation’s economic outlook.”

“There have long been safety nets in place that allow borrowers to make reduced payments that are affordable based on their current income, but it is rarely discussed in mainstream coverage of this issue,” Beth Akers, Senior Fellow at the American Enterprise Institute, told the media report. Additionally, the Department withe Department will eventually erase debts as long as they remainable. If borrowers need that kind of assistance, they should visit the Department’s website and find out how to sign up for income-based repayment.

“Borrowers should immediately contact the servicer of their loan and ask about income-based repayment options,” she said. “They will be asked to prove their income and then their payments will be reduced to an affordable level.”

“Student loan repayments have to start at some point, and they probably should have started much earlier than they did,” Robert Kelchen, Head of the Department of Educational Leadership and Policy Studies at the University of Tennessee, Knoxville, told the media report. However, any stoppage in collections, whether it lasts for a year or five, would cause issues for both students and the firms that handle student loan servicing.

“People with larger loans can access income-driven repayment plans to help them manage their loans,” he said. “I’m worried that the Department of Education and servicers lack the staff to help students who have trouble signing up.”

ent financial assistance specialist Mark Kantrowitz said that the return of involuntary collections implies “that the defaulted borrower will have less income to pay for necessities.”

“Of course, borrowers who repay their student loans have less income available to pay for other priorities, too,” he said. “But a borrpriorities,efaults on their student loans will have proportionately less income available, in part because the collection charges slow the trajectory toward paying off the debt in full.”

According to Kantrowitz, those who are having long-term financial problems may think about transferring to an income-driven repayment plan, which lowers the monthly payment by extending the payback period to 20 to 25 years. But he cautioned that such an arrangement would raise the lsuch an arrangements overall cost. The Education Department has advised those who are having trouble repaying their loans to look at their choices at studentaid.gov.