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2mo ago

Federal Student Loan Collections Resume After Five-Year Pause

195,000 defaulted borrowers receive notices of impending wage and benefit seizures, with broader enforcement actions targeting over 5 million accounts this summer.

The Education Department began sending notices to 195,000 defaulted borrowers to notify them that they will be subject to wage garnishment.
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Overview

  • The U.S. Department of Education has restarted federal student loan collections, ending a five-year suspension initiated during the COVID-19 pandemic.
  • Approximately 195,000 borrowers in default have been issued 30-day Treasury Offset notices, warning of tax refund and benefit seizures starting in June.
  • Later this summer, all 5.3 million borrowers in default will receive notices of administrative wage garnishment, affecting up to 15% of their earnings.
  • Borrowers can exit default through loan rehabilitation, consolidation, or full repayment, with rehabilitation requiring nine on-time monthly payments based on income.
  • Advocates and lawmakers warn of economic strain for millions of borrowers as repayment options remain uncertain due to ongoing legal challenges to income-driven plans.