After a bout of panic buying, more consumers are prepared to rein in their spending and live with less, recent studies show. Even President Donald Trump suggested that Americans should be comfortable with fewer things.

“[Americans] don’t need to have 250 pencils,” Trump said on NBC News’ “Meet the Press.” “They can have five.”

According to a study by Intuit Credit Karma, 83% of consumers said that if their financial situation worsens in the coming months, they will strongly consider cutting back on their non-essential purchases.

Over half of adults, or 54%, said they’ll spend less on travel, dining or live entertainment this year, compared to last year, a new report by Bankrate also found. The site polled nearly 2,500 people in April.

“Moving forward, people may not be able to absorb these higher prices,” said Ted Rossman, Bankrate’s senior industry analyst. “It sort of feels like something has to give.”

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While many Americans are concerned about the effect of on-again, off-again tariff policies, few have changed their spending habits yet. Up until now, that is what has helped the U.S. avoid a recession.

Because it represents a significant portion of Gross Domestic Product and fuels economic growth, consumer spending is considered the backbone of the economy.

“Consumers are still spending despite widespread pessimism fueled by rising tariffs,” said Jack Kleinhenz, chief economist of the National Retail Federation. “While tariffs may have weighed on spending decisions, growth is coming at a moderate pace and consumer spending remains steady, reflecting a resilient economy.”

However, now the economy is “at a pivot point,” according to Kleinhenz.

“Hiring, unemployment, spending and inflation data continue in the right direction, but at a slower pace,” Kleinhenz said in a recent statement. “Everyone is worried, and a lot of people have recession on their minds.”

Trump’s tariffs jump started a wave of declining sentiment, which plays a big part in determining how much consumers are willing to spend.

“Any time there is this much uncertainty, people tend to get a little more cautious,” said Matt Schulz, chief credit analyst at LendingTree. 

The Conference Boards’ expectations index, which measures consumers’ short-term outlook, plunged to its lowest level since 2011. The University of Michigan’s consumer survey also showed sentiment sank to the lowest reading since June 2022 and the second lowest in the survey’s history going back to 1952.

“The cumulative effects of inflation and high interest rates have been straining households, contributing to record levels of credit card debt and causing consumer sentiment to plummet,” Rossman said.

Tack on the Trump administration’s resumption of collection efforts on defaulted federal student loans and many Americans, who are already under pressure, will suddenly have less money in their pockets.

As it stands, roughly half — 47% — of U.S. adults would not consider themselves financially prepared for a sudden job loss or lack of income, according to recent data from TD Bank’s financial preparedness report, which polled more than 5,000 people earlier this year.

Another 44% of Americans said they think about their financial preparedness every single day.

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Jason Collier, a special education teacher in Virginia, often needs to wait until payday to fill up the gas tank of his car — and in the meantime hopes he doesn’t run out.

“Money is tight when you’re a teacher,” Collier, 46, said.

Now he’s afraid that the U.S. Department of Education will soon garnish up to 15% of his wages because he’s behind on his student debt payments. Collier said he hasn’t been able to meet his monthly bill for years, while juggling the expenses of raising two children and medical expenses from a cancer diagnosis.

If his paycheck is garnished, “it would just be more of a pinch,” Collier said. “If I need a car repair, or something comes up, I might not be able to do those things.”

After a half-decade pause of collection activity on federal student loans, the Trump administration announced on April 21 that it would once again seize defaulted borrowers’ federal tax refunds, paychecks and Social Security benefits.

More than 5 million student loan borrowers are currently in default, and that total could swell to roughly 10 million borrowers within a few months, according to the Education Department.

The Biden administration focused on extending relief measures to struggling borrowers in the wake of the Covid pandemic and helping them to get current. The Trump administration’s aggressive collection activity is a sharp turn away from that strategy.

“Borrowers should pay back the debts they take on,” said U.S. Secretary of Education Linda McMahon in a video posted on X on April 22.

More than 42 million Americans hold student loans, and collectively, outstanding federal education debt exceeds $1.6 trillion. The Education Department can garnish up to 15% of defaulted borrowers’ disposable income and federal benefits, as well as their entire federal tax refunds.

“In an environment where the cost of living remains stubbornly high, this kind of withholding from your income can pose real problems when trying to make ends meet, and force people into choosing between vital expenses,” said Nancy Nierman, assistant director of the Education Debt Consumer Assistance Program in New York.

Most people who default on their student loans “truly cannot afford to pay them,” James Kvaal, who served as U.S. undersecretary of education for former President Joe Biden, said in an April interview with CNBC.

“The consequences are punitive and sometimes tragic,” Kvaal said.

She felt terrified when she received a recent notice from the Education Dept. that her retirement check could be offset. Nearly all of her income comes from her monthly Social Security benefit of around $2,600. Social Security benefits can generally be reduced by up to 15% to repay student debt in default, so long as beneficiaries are left with at least $750 per month.

“When I saw that email, it made me sick to my stomach,” Paul said.

Already on a tight budget in retirement, the garnishment will force her to cut back on her everyday expenses, skip necessary repairs on her house in Maryland and forgo traveling to her home country.

“I don’t know the last time I had a vacation,” she said. “I’ve paid into the system and I should be able to retire.”

More than 450,000 borrowers ages 62 and older in default on their federal student loans and likely to be receiving Social Security benefits, the Consumer Financial Protection Bureau found earlier this year.

Millions of borrowers who signed up for the Biden administration’s new repayment plan, known as SAVE, or the Saving on a Valuable Education program, were caught in limbo after GOP-led lawsuits managed to get the plan blocked in the summer of last year. Many of those borrowers will now have to switch out of a Biden-era payment pause and into another repayment plan that will spike their monthly bill.

But in recent months, the Trump administration has terminated around half of the Education Department’s staff, including many of the people who helped assist borrowers.

Now some student loan borrowers report waiting hours on the phone before being able to reach someone about their debt, despite the Trump administration telling borrowers to contact it to get current.

The Education Department did not respond to a request for comment.

She received conflicting information over whether her student loan servicer was Mohela or Navient (millions of people have had their accounts transferred between companies in recent years.) When she tried to reach someone at Navient about her student debt, she was on hold for more than two hours.

Meanwhile, a representative at Mohela couldn’t tell her what her new student loan payment would be, though she was quoted $319 by the company’s automated phone system.

Mohela and Navient did not respond to a request for comment.

Brown is still not sure which company is managing her account.

“The narrative is that people are dodging their payments,” Brown said, but added that she doesn’t think that’s true for many borrowers. “I truly believe many people will be blindsided due to lack of guidance on how to repay.”

If she’s not able to reach someone at the Education Dept. to get current on her payments and her wages are garnished, it’ll be a significant hardship for her family, she said.

“We’re living paycheck to paycheck,” she said. “I’m lucky if I can even put aside $100 for myself.”

As the Trump administration ramps up its student loan collection efforts, worried borrowers need to ask themselves a key question: Am I delinquent, or in default? The answer determines your best next steps.

“We’ve had a lot of clients contacting us recently who are extremely stressed and, in some cases panicked, about their loan situation,” said Nancy Nierman, assistant director of the Education Debt Consumer Assistance Program in New York.

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However, some borrowers wrongly believe they’ll be subject to wage garnishments or offsets of their retirement benefits — when in fact they are delinquent but not yet in default, Nierman said.

If you’re delinquent, there are things you can do to avoid default. And even those who are in default and at risk for collections can take steps to avoid such outcomes.

“The federal student loan system does provide several paths for bringing loans out of default,” she said.

Nearly 8% of total student debt was reported as 90 days past due in the first quarter of 2025, the New York Fed recently found.

Once you are delinquent for 90 days or more, your student loan servicer will report your past due status to the national credit bureaus, which can lead to a drop in your credit score.

The Federal Reserve predicted in March that some people with a student loan delinquency could see their scores fall by as much as 171 points. (Credit scores typically range from 300 to 850, with around 670 and higher considered good.)

Lower credit scores can lead to higher borrowing costs on consumer loans such as mortgages, car loans and credit cards.

But you’re not considered to be in default on your student loans until you haven’t made your scheduled payment in at least 270 days, the Education Department says.

The federal government has extraordinary collection powers on its student loans and it can seize borrowers’ tax refunds, paychecks and Social Security retirement and disability benefits.

But only those who’ve defaulted on their student loans can face these consequences, experts said.

There are also economic hardship and unemployment deferments available for those who qualify, as well as other ways to keep your loan payments paused while not falling behind.

You can contact the government’s Default Resolution Group and pursue a number of different avenues to get current on your loans, including enrolling in an income-driven repayment plan or signing up for loan rehabilitation. 

You can get out of default on your student loans through rehabilitating or consolidating your debt, Nierman said.

Rehabilitating involves making “nine voluntary, reasonable and affordable monthly payments,” according to the U.S. Department of Education. Those nine payments can be made over “a period of 10 consecutive months,” it said.

Consolidation, meanwhile, may be available to those who “make three consecutive, voluntary, on-time, full monthly payments.” At that point, they can essentially repackage their debt into a new loan.

After you’ve emerged from default, experts also recommend requesting a monthly bill you can afford.

If you don’t know who your loan servicer is, you can find out at Studentaid.gov.

“Explore your options and create a plan for returning your loans back to good standing so you will not be subject to punitive collections activity,” Nierman said.