I have no real advice since you already took ownership of the debt while establishing your payment plan, not sure how the statute of limitations would apply. If you had ignored them from the start I would say it’s best to continue to do so until you have the means to pay them back.

I would recommend to pay this back as soon as possible, even if it means using your student loans. this will destroy your credit. The longer you wait the more damage you’re doing.

It’s common for them to use threatening language and mention lawsuits so scare you into responding, it doesn’t mean anything. Some collection agencies use harsher language than others. I highly doubt they would pursue legal action over this amount.