A coalition of more than 60 congressional Democrats is demanding that the Department of Education move immediately to slow what they call the largest student loan default and delinquency crisis on record, putting renewed scrutiny on the forced collections and servicer practices that directly affect the credit and collection industry.
In a letter to Education Secretary Linda McMahon, Sen. Elizabeth Warren [D-Mass.] and Sen. Jeff Merkley [D-Ore.] , along with Rep. Ayanna Pressley [D-Mass.] and Rep. André Carson [D-Ind.], cited new data showing close to 9 million borrowers in default, up from 5 million last summer. The lawmakers said 3.6 million borrowers defaulted during the Trump administration’s first year, and that 75% of those who slid from delinquency into default had never defaulted before. One in four borrowers with payments due is now delinquent, and a greater share of student loan balances entered serious delinquency in 2025 than auto loans, credit cards, or mortgages.
For the ARM industry, the most consequential issue is the future of forced collections. The administration paused wage garnishment, Social Security offsets, and tax refund seizures earlier this year, but the department has characterized that pause as only a “temporary delay.” The Education Department has since announced an arrangement transferring the defaulted portfolio and the collections process to the Treasury Department. Citing Moody’s Analytics, the lawmakers warned that resuming garnishment across all defaulted borrowers could pull more than $30 billion from paychecks by the end of next year.
The letter also flagged a Government Accountability Office finding that the department’s reduced servicer oversight has left borrowers exposed to inaccurate billing with fewer remedies, a risk the lawmakers said will intensify during the coming SAVE plan transition. More than 7.5 million borrowers face automatic enrollment in higher-cost repayment plans if they do not select an option within 90 days.
The coalition urged the department to cancel debt for qualified borrowers under existing programs, rehire terminated Federal Student Aid staff, clear a backlog of more than 530,000 income-driven repayment applications, enroll SAVE borrowers in the lowest-cost plan available, and continue the collections pause while ending the Treasury agreement. They also pressed for a new interest-free forbearance for borrowers who cannot afford payments.
Credit score damage is already spreading. The lawmakers noted roughly 2 million borrowers saw scores fall by an average of 100 points in 2025, and that subprime borrowers pay about $3,400 more annually for loans and insurance.
The lawmakers set a June 22 deadline for written answers on collection timelines, backlog clearance, and servicer monitoring. Treasury Secretary Scott Bessent was copied on the letter.
