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debt collective
'That’s Not Winning': Record Numbers of US Workers Are Raiding Their 401(k)s in Trump Economy
"Instead of helping, Trump made the largest healthcare cuts in American history and doubled down on his costly tariff taxes," said Rep. Brendon Boyle.
Mar 04, 2026
Even as President Donald Trump has declared that the US is in a "golden age" with the "greatest" economy on record, the Wall Street Journal reported on Wednesday that a record number of US workers are dipping into their retirement savings.
The Journal cited recent data from Vanguard Group showing that 6% of the 401(k) plans it administers took a hardship withdrawal in 2025, up from 4.8% that took such a withdrawal in 2024.
The top reasons for such withdrawals last year were avoiding eviction or paying off medical expenses, according to Vanguard.
The Journal noted that the Vanguard data about hardship withdrawals comes as "more Americans are falling behind on debt payments, including on some types of mortgages, putting them at risk of foreclosure," and "the average income of clients seeking help from credit-counseling agencies is rising."
Some Democrats quickly pounced on the Journal report, which they said undercut Trump's rosy assessment of the US economy.
"Record numbers of Americans are raiding their 401(k)s to avoid eviction or pay medical bills," wrote Rep. Mike Levin (D-Calif.). "That's not winning."
Rep. Brendan Boyle (D-Pa.) pointed to the Journal report and accused Trump and the GOP of exacerbating these problems with the cuts to Medicaid contained in the One Big Beautiful Bill Act that the party passed in 2025.
"A record number of Americans are dipping into their retirement savings just to stay afloat," wrote Boyle, the ranking member of the House Budget Committee. "A leading cause: Skyrocketing healthcare costs. Instead of helping, Trump made the largest healthcare cuts in American history and doubled down on his costly tariff taxes."
Senate Minority Leader Chuck Schumer (D-NY) responded to the report by saying, "This is not the golden age Donald Trump promised."
Andrew Bates, former senior deputy press secretary for President Joe Biden, also pointed to the GOP budget law as a key reasons for Americans' deteriorating financial security.
"The GOP in Washington makes the biggest healthcare and energy cuts in history, just to lower taxes for the rich," he wrote. "'Golden Age' for Jeffrey Epstein’s surviving friends, shittiness for everyone else."
Ann Larson, co-founder of Debt Collective, noted that while the data on 401(k) withdrawals is disturbing, it doesn't tell the whole story of the dire overall state of Americans' finances.
"This is bad, but add in the almost half of older Americans who have ZERO retirement savings to pull from," Larson wrote, "and the picture is even more horrifying."
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Trump Admin Will Garnish Struggling Borrowers' Wages as Student Loan Payments Resume
"This is just cruel and doesn't have to happen," said the Debt Collective.
Apr 21, 2025
The Trump administration on Monday announced that it will resume involuntary collection measures against defaulted federal student loan recipients, including garnishing wages, tax refunds, and Social Security benefits and "other actions to help borrowers get back into repayment," as the U.S. Department of Education euphemistically said.
"Resuming collections protects taxpayers from shouldering the cost of federal student loans that borrowers willingly undertook to finance their postsecondary education," DOE said in a statement notifying the public that collections will resume May 5. "This initiative will be paired with a comprehensive communications and outreach campaign to ensure borrowers understand how to return to repayment or get out of default."
The DOE said the U.S. Treasury Offset Program will administer borrower garnishments, which are expected to resume this summer.
DOE continued:
While Congress mandated that student and parent borrowers begin to repay their student loans in October 2023, the Biden-Harris administration refused to lift the collections pause and kept borrowers in a confusing limbo. The previous administration failed to process applications for borrowers who applied for income-driven repayment and continued to push misguided "on-ramps" and illegal loan forgiveness schemes to win points with borrowers and mask rising delinquency and default rates.
"American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies," billionaire U.S. Education Secretary Linda McMahon said on Monday.
The repayment resumption is part of the Trump administration's three-pronged, $1.6 trillion overhaul of the federal student loan system. In addition to moving to collect on defaulted loans, the administration is looking to end former President Joe Biden's Saving on a Valuable Education (SAVE) plan, an income-driven repayment program currently blocked by a federal appellate court. President Donald Trump also signed an executive order narrowing eligibility for the Public Service Loan Forgiveness program.
Last month, the American Federation of Teachers led a lawsuit against the Trump administration after the DOE cut off access to income-driven repayment plan applications and secretly ordered student loan services to stop accepting and processing such applications.
The government has not collected on defaulted student loans since March 2020, when the first Trump administration paused repayments due to the burgeoning Covid-19 pandemic. The reprieve, which was subsequently extended several times, was set to end in September 2023. Efforts by the Biden administration to forgive some or all loan debt for more than 45 million student borrowers were thwarted by the right-wing U.S. Supreme Court in 2023.
"The Biden administration misled borrowers: The executive branch does not have the constitutional authority to wipe debt away, nor do the loan balances simply disappear," said McMahon. "Hundreds of billions have already been transferred to taxpayers."
"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," she added.
As McMahon and the Trump administration work toward ending the DOE—a key goal of Project 2025, the Heritage Foundation-led plan to eviscerate the federal government—Trump has ordered the administration of federal student loans to be transferred to the Small Business Administration (SBA), which was headed by McMahon during Trump's first term.
Approximately 5.6 million student borrowers were in default at the end of 2024. The DOE warns that "there could be almost 10 million borrowers in default in a few months" after repayments resume. That's roughly 25% of the current student loan portfolio. Failure to make timely student loan repayments results in lower credit scores for borrowers, who in turn generate less economic activity—a domino effect with implications for the entire slowing U.S. economy.
"They bailed out banks, corporations, and airlines. But when it comes to student debt? Suddenly it's 'too expensive.'"
"Many of the households required to resume paying on their student loans are also struggling with credit card debt at near-record interest rates and high-rate mortgages they thought they would be able to refinance into a lower rate, but haven't," explained Moody's Analytics chief economist Mark Zandi in a Monday interview with The New York Times.
Some critics slammed the Trump administration for resuming student loan repayments amid an affordability and housing crisis during which a record number of people are unhoused.
"Parents delaying retirement. Grads postponing families. This isn't 45 million separate problems, it's one national crisis," the Student Debt Crisis Center (SDCC) said on social media. "They bailed out banks, corporations, and airlines. But when it comes to student debt? Suddenly it's 'too expensive.'"
SDCC executive director Mike Pierce said that "federal law gives borrowers a way out of default and the right to make loan payments they can afford. Since February, Donald Trump and Linda McMahon have blocked these borrowers' path out of default and are now feeding them into the maw of the government debt collection machine."
"This is cruel, unnecessary, and will further fan the flames of economic chaos for working families across this country," Pierce added.
Tuition-free college would help make America great. Those who need loans to attend college come from working class families, the elites don’t need loans. 40% of student debt holders don’t hold a degree. This will hurt the working class.
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— Nina Turner (@ninaturner.bsky.social) April 21, 2025 at 2:07 PM
Others offered solutions enjoyed by people in other countries, including simply not collecting the debt and making colleges and universities tuition-free—even if their chances of implementation under what many leftists call U.S. "late-stage capitalism" are next to nil.
"If the Trump/Musk administration really wanted 'government efficiency,' then they wouldn't be collecting on debts people cannot and will not pay,"
said the Debt Collective, a debtors' union, referring to Elon Musk, who heads the Department of Government Efficiency. "They would just cancel it and boost the economy."
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Maine Nonprofit Cancels $1.9 Million in Medical Debt for 1,500 People
"This is just a drop in the bucket," a campaigner said. "Now, it's up to our lawmakers to make healthcare affordable for everyone in our state and to eliminate medical debt."
Oct 24, 2024
Mainers For Working Families, an advocacy group, announced on Thursday that it had partnered with a larger nonprofit to relieve $1.85 million worth of medical debt for 1,508 low-income people who live in Maine.
MFWF furnished a donation of $12,740 to Undue Medical Debt, a 501(c)(3) group formed by former collections executives, which bought the $1.85 million in debts; such debt is sold at pennies on the dollar.
The recipients, spread all over Maine, were people who live four times below the Federal Poverty Level or for whom medical debt totals more than 5% of their annual income.
"We can't turn back the clock for these people, but we had to do something," Evan LeBrun, MFWF's executive director, said in a statement.
"This is just a drop in the bucket," he added. "Now, it's up to our lawmakers to make healthcare affordable for everyone in our state and to eliminate medical debt."
BREAKING: Mainers for Working Families is partnering with @unduemeddebt to purchase and forgive $1.8 million in medical debt for over 1,500 Mainers across the state. pic.twitter.com/gkf4QELoiA
— Mainers For Working Families (@ForMainers) October 24, 2024
MFWF has worked on healthcare affordability issues since 2021 and medical debt since last year, a representative told Common Dreams. The group recently released a series of videos on the topic based on interviews conducted around Maine.
Undue Medical Debt formed in 2014 following inspiration from debt cancellation projects undertaken by Occupy Wall Street participants, including activist-intellectuals such as Astra Taylor and David Graeber. The nonprofit, which drew donor attention after it was featured by comedian John Oliver on his HBO show in 2016, has now canceled nearly $15 billion in medical debt, according to its website. Oliver himself made a contribution to the group, which was previously known as R.I.P. Medical Debt.
Nationwide, nearly 100 million people are dealing with unpaid medical bills, according to federal data.
The push for change in the field of medical debt has yielded a series of small victories. Last year, the three major consumer report agencies—Equifax, Experian, and TransUnion—stopped including medical debts below $500 on their credit reports, according to the Consumer Financial Protection Bureau. In June, the CFPB moved to ban all medical debt from credit reports, drawing praise from progressives such as Sen. Bernie Sanders (I-Vt.).
Vice President Kamala Harris, the Democratic presidential nominee, has pushed medical debt cancellation in her current role and pledged, as part of her economic agenda, to work with states to states to cancel more debt if she wins in November.
A working paper published by the National Bureau of Economic Research in April called into question the premise of Undue's work, finding that recipients of debt relief had no better credit scores or mental health than a control group. A co-author said the results had "disappointed" the researchers.
However, research has shown strong benefits to other forms of debt relief, and a 2023 survey conducted by Undue and other groups did show that medical debt negatively affected mental health for most people and caused 42% to delay further medical care.
Medical debt disproportionately affects people who are poor, Black, or disabled, according to Peterson-KFF Health System Tracker. About 3 million Americans have more than $10,000 in medical debt.
One is a woman named Kim, a resident of Old Town, Maine, whom MFWF interviewed in a recent video. She lives off of $26,200 per year and has roughly $2 million in debt, thanks to her fight with Addison's disease, a chronic endocrine disorder.
"I am really hoping that someone sees what is actually happening out there," she said. "God, I hope so."
Efforts to address the issue at the Maine state level have achieved mixed success. A modest reform bill that prevents debt accrual on medical debt did pass in Augusta in April.
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