Student Loan Debt Is Back

And It Could Mess With More than Just Your Wallet

Resumed student debt collections could hurt entrepreneurs' credit scores.

After five long years, federal student loan collections are officially back.

If you're one of the millions of Americans with defaulted student loan debt, collection efforts just resumed—and that could mean serious consequences for your credit score, your stress levels, and yes, even your business.

Let’s break down what’s happening, what it means for small business owners, and how to protect your financial future (without giving up on your growth plans).

Wait, What’s Going On with Student Loan Debt?

Back in 2020, federal student loan payments were put on pause during the pandemic. Borrowers in default were given a break, and for a while, things got quieter.

But as of May 2025, the pause is over, and if your loans were already in default before COVID, the government is coming to collect.

That could mean:

❌ Wage garnishment

❌ Tax refund offsets

❌ Damage to your credit report

And unfortunately, the folks most affected are often the ones already struggling to get ahead.

Why Your Credit Score Just Became Even More Important

Your credit score is more than just a number—it’s the key to unlocking capital, especially when you're a business owner.

When student loan debt goes into default, it can seriously hurt your score. Late payments, collections, and default status can all linger on your credit report for years.

That means:

⛔ Higher interest rates

⛔ Loan denials

⛔ Missed opportunities to grow

Even if your business is profitable, your personal credit score still plays a big role in whether a bank says “yes” when you need funding. And right now, that score may be taking hits you can’t afford.

If You’re a Business Owner, This Isn’t Just Personal

Let’s be real—running a business is hard enough. You’re already juggling inventory, payroll, marketing, customer service, and probably a million tiny fires each week.

Now throw in a surprise tax offset or wage garnishment because of student loan debt in default? That’s the kind of curveball that can mess up your cash flow, delay a new hire, or put your growth plans on pause.

It’s not fair—but it is the reality for a lot of entrepreneurs right now.

What You Can Do Right Now

If this sounds familiar, don’t panic—but don’t ignore it either.

Here’s what you can do:

✅ Look into the “Fresh Start” program. It gives borrowers a second chance to get out of default and clear the negative marks from their credit.

✅ Pull your credit report. Knowing what’s on there is the first step to getting ahead of it.

✅ Get on top of your payments. Even small on-time payments help rebuild trust with lenders.

✅ Talk to someone. A student loan counselor or nonprofit credit expert can walk you through your best options.

And If You’re Still Trying to Grow…

We know it’s tough to think about growing when it feels like you’re treading water. But here’s the thing: growth doesn’t have to mean taking on risky debt or maxing out credit cards.

If you’ve ever thought, “I want to expand, but I don’t know how much money I actually need”—you’re not alone. Most business owners don’t.

That’s why we created The Funding Formula.

It’s a quick, no-pressure tool that helps you figure out how much capital you’d realistically need to take your next big step—whether that’s opening a second location, buying new equipment, or just getting through a rough patch. No complicated math, no hard credit pulls, no spammy sales calls.

Just clarity.

👉 Use The Funding Formula to get your number—and move forward with confidence.