Student loan borrowers, herded into default, face a relentless collector: the U.S.

Lakisha Johnson figured all she needed was her 2016 tax refund to get her and her daughter out of a homeless shelter and back into a place of their own.

The U.S. Department of Education had other plans.

Johnson, a home health aide, and 12-year-old Aijiah were forced to move out of their West Philadelphia apartment just before Thanksgiving last year, after the landlord jacked up the rent from $675 to $875. Soon, they were living on a bunk bed in the shelter a few blocks from Aijiah’s school. The girl was petrified that a classmate would see her using the secured entrance of the crowded, noisy shelter.

With the $13 an hour she earns caring for her elderly charges, Johnson planned to stay at the shelter — or with anyone who would let the two sleep on a floor, a couch or a spare mattress — until April. In past years, that’s when she received her federal Earned Income Credit tax refund.

The check never came.

On the phone, an Internal Revenue Service agent told her the Department of Education (DOE) was “holding back” the $8,220 refund to recoup some of her student loan debt. It would probably do the same next year, the agent told her, to recover the rest of the nearly $17,000 she owed.

Johnson was confused. The two student loans she took out in 2006 in hopes of becoming a medical assistant amounted to only $6,625. Whenever she fell behind on her payments, she would be enrolled in one of the forbearance plans promoted in a continuous stream of emails she received from Navient Corp, the largest loan servicer working under contract for the DOE. An Oct. 4, 2011, email, for example, stated: “You may be able to qualify for a deferment or forbearance, which can postpone your loan payments and keep your loan from going into default.”

She was learning only now that those plans, while allowing her to stall payments, didn’t stop her debt from ballooning as interest and fees piled up. And she was now in default, prompting the DOE to move to collect.

That was only the half of it. Until contacted by Reuters, Johnson didn’t realize that she could have avoided the entire ordeal by enrolling in one of the government’s income-based repayment plans — an option she said Navient never discussed with her. Most of these plans allow for monthly payments as low as zero and forgive any remaining debt after 20 years.

“I didn’t think it was going to double up or stack up, or cause me to lose the money I had worked for this whole time,” she says. “This is a big hit. They’ve put me in a deep situation.”

It’s a situation Johnson shares with many of the 8 million borrowers in the United States who are in default on a combined $137.4 billion in government-held or government-backed student loans.

Read more at Reuters: https://www.reuters.com/investigates/special-report/usa-studentloans/