Officials said that the Education Department would begin collecting next month for student loans in default. This could include garnishing the wages of millions of potential borrowers.
Around 5.3 million federal student loan borrowers are in default.
The announcement by the Trump administration marks the end of a period that began with the COVID-19 epidemic. Since March 2020, no federal student loans – including defaulted ones – have been sent to collection.
Starting May 5, the Treasury Department will begin an involuntary collection program. This offset program withholds government payments, including tax refunds and federal salaries, from those who owe the government money. The department will begin garnishing the wages of borrowers who are in default after a 30-day warning.
Many borrowers are already preparing for the due date of their obligations.
As a temporary measure to help student borrowers, the Biden Administration paused payments on federal student loans and interest accruals in 2020. The suspension of payments was repeated several times until 2023. A final grace period ended in October 2024. This meant that tens and millions of Americans were forced to begin making payments once again.
If a borrower does not make a payment for nine months, they are in default. This is reported to their credit score, and they can be collected.
In addition to those who are already in default, another 4 million borrowers are between 91 and 180 days behind on their payments. Department officials reported that less than 40% of borrowers were current with their student loan payments.
