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5mo ago

Student Loan Collections to Resume May 5 After Five-Year Pause

The Education Department will restart involuntary recoveries on defaulted federal student loans, affecting millions of borrowers and utilizing wage garnishments and federal payment offsets.

A view of the U.S. Department of Education building in Washington, D.C., U.S., February 1, 2025. REUTERS/Annabelle Gordon
A person walks past the U.S. Department of Education on March 20, 2025 in Washington, DC.
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Overview

  • The Treasury Offset Program will withhold tax refunds, federal salaries, and other payments, with wage garnishments starting after a 30-day notice.
  • Approximately 5.3 million borrowers are currently in default, with an additional 4 million in late-stage delinquency nearing default status.
  • Fewer than 40% of federal student loan borrowers are up to date on payments, raising concerns about widespread financial strain.
  • Borrowers in default will receive email notifications urging them to contact the Default Resolution Group to explore repayment plans or loan rehabilitation options.
  • Secretary of Education Linda McMahon framed the decision as a return to fiscal responsibility, drawing criticism from advocates who warn of economic hardship for affected borrowers.