WASHINGTON (TNND) — Student loan borrowers in delinquency will soon be faced with a choice of returning to making payments or having their accounts sent to collections after a shift in policy from the Education Department that comes at a time of economic uncertainty and slumping consumer confidence over fears of tariffs and inflation.

The Department of Education said this week that roughly 5 million borrowers will have their loans sent to collections beginning on May 5. Another 4 million accounts are in late-stage delinquency and could face collections within the next few months, creating an economic challenge for households struggling to keep up on payments.

Borrowers could be referred to debt collectors, have wages garnished or automatically enrolled in income-driven repayment plans, which comes after several years of (adjective) from the previous administration.

Student loan payments were paused for years during the coronavirus pandemic and only recently returned to repayments as the Biden administration sought to cancel balances and make it easier for people to pay back their loans or have them forgiven due to financial hardships.

The Trump administration is taking a starkly different approach and is pushing borrowers back into repayment.

“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” Secretary of Education Linda McMahon said in a statement. “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.”

Nearly 43 million people hold loans from the federal government, totaling over $1.6 trillion in debt. More than 5 million of those accounts have not made a payment in the last year, the Education Department said in its announcement. Just 38% of borrowers are in repayment and current on their student loans.

Delinquencies on student loans have been rising since a return to repayment, with the number of people delinquent on their loans roughly doubling the pre-pandemic rate. Confusion over what was due when has been part of the problem but affordability issues with making payments have also been noted in research.

A study by the Federal Reserve Bank of Philadelphia found that more than half of borrowers who did not make their first full payment in October 2023 said they could not afford it. Others had issues with billing errors or just chose not to pay.

“Resuming student loan payments will affect millions of Americans and could hit the economy hard. With nearly 10 million borrowers at risk of default and collections starting May 5, many people will have less money to spend, which could negatively affect both their personal finances and overall consumer spending. It’s a big shift after years of paused payments, and the timing isn’t ideal with the economy already on shaky ground,” said Chip Lupo, a WalletHub analyst.

In addition to the squeeze on budgets, borrowers could also see their credit scores plummet if they do not resume making payments. Low credit scores make it harder for people to rent or buy homes and get access to loans for other needs, forcing them to turn to higher-risk options and credit cards.

The effects on the economy may be somewhat limited due to the small scope of people it will impact in comparison to the level of overall spending that makes up roughly 70% of economic activity. But it is yet another challenge for consumers to navigate during a time of tremendous economic uncertainty with a raging trade war with China, threats of expansive tariffs that economists say will raise prices and inflation lingering over 2%.

“Add that to high housing costs, lingering inflation, and shaky consumer confidence, and it’s clear a lot of households are already stretched too thin. For many, restarting payments could mean falling behind on other bills or cutting spending just to stay afloat,” Lupo said.

Many economic forecasters have increased their odds of a recession hitting the U.S. over the next year as a result of the tariffs and resulting trade war and are expecting businesses to slow hiring and consumers to reduce their spending levels.

Attitudes about the economy have also plummeted since the start of the year in surveys that have shown shrinking confidence about job security and price stability. Two gauges of consumer sentiment have sunk to the lowest levels since the pandemic with mounting fears about the effects tariffs will have on the economy.

The trend is being watched by economists to see if it turns into reduced spending that would in turn slow economic growth. Most economists are expecting consumers to close their wallets later this year once the effects of tariffs take hold but has not yet happened.

Consumer spending beat expectations last month with a robust 1.4% increase but was mostly powered by purchases of big-ticket items that could have been a signal of consumers trying to beat tariff-induced price increases.