The Department of Education announced yesterday that it will resume collections on federal student loans beginning on May 5, ending a five-year hiatus prompted by the COVID-19 pandemic. This move will affect approximately 5 million borrowers currently in default, with the department planning to begin wage garnishments and other collection measures in the coming months.
Key Details:
- Treasury Offset Program Restart: Starting May 5, the department will use the Treasury Offset Program to collect past-due student loan payments by withholding tax refunds, Social Security benefits, and other federal payments from defaulted borrowers.
- Wage Garnishment: Later in the summer, administrative wage garnishments will begin for borrowers who have been in default for 270 days or more.
- Impact on Borrowers: With the restart of collections, many borrowers will see their credit scores suffer. As of February 2025, 2.7 million federal student loan borrowers had new late payments recorded on their credit reports. Over 40 million Americans owe more than $1.6 trillion in student loan debt, with a significant number of them now at risk of falling into default.
The move to restart collections follows several years of deferred payments and a shift in administration policies that have left many borrowers in a state of confusion. While the Biden administration previously extended the pause on student loan payments, the Trump administration’s recent decisions to resume collections have added uncertainty for millions of borrowers, many of whom are already struggling with other debts.
What’s at stake?: The impact of defaulted student loans is far-reaching. Beyond the immediate financial burden, the resumption of collections could lead to severe consequences for borrowers, including garnished wages, tax refund offsets, and a potential dip in their credit scores. Federal data shows that only 38% of borrowers are currently making payments on their loans, with millions more either delinquent or in forbearance.
As collections begin again, borrowers are being urged to act quickly. The Department of Education recommends that those in default contact the Default Resolution Group to arrange a payment plan or enter into loan rehabilitation, which can help reverse the default status after nine consecutive payments.
Looking ahead: The Department of Education has promised a robust communications campaign to ensure borrowers are aware of their options, including enrollment in income-driven repayment plans and loan rehabilitation programs. As part of this effort, the department plans to expand its outreach through emails, social media, and extended service hours for loan servicers.
What they said: “American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies. 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. 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.” –Linda McMahon, Secretary of Education
“For five million people in default, 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.” –Mike Pierce, Executive Director of the Student Borrower Protection Center
“The folks who fall behind on their payments are those who are least well served by the higher education and repayment systems. A lot of those folks did not receive a return on their higher education investment … These aren’t people who overwhelmingly do not want to pay their loans.” –Sarah Sattelmeyer, Project Director for education, opportunity and mobility in the higher education initiative at New America
