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3w ago

Federal Student Loan Collections Resume After Five-Year Pause

Over 5.3 million borrowers in default face wage garnishment, tax refund seizures, and other penalties under renewed enforcement measures.

Graduates of Colorado Mountain College wait to receive their diploma during the Commencement of the Class of 2022 Friday, May 6, in Beaver Creek, Colorado.

Overview

  • The Department of Education reinstated collections on defaulted federal student loans on May 5, 2025, ending a five-year suspension initiated during the COVID-19 pandemic.
  • Approximately 5.3 million borrowers are currently in default, with another 4 million at risk of default due to delinquency of 91 to 180 days.
  • The Treasury Offset Program will withhold tax refunds, Social Security benefits, and federal salaries from borrowers in default, with wage garnishment notices set to begin later this summer.
  • Borrowers in default can exit through loan rehabilitation, requiring nine consecutive payments, or by consolidating loans into a single Direct Consolidation Loan.
  • The resumption occurs as delinquency rates hit record highs, with over 20% of borrowers at least 90 days past due on payments, reflecting broader financial strain.