After a five-year hiatus, the U.S. Department of Education will resume collecting on defaulted federal student loans starting May 5, 2025. This move ends the leniency period that began in March 2020 during the COVID-19 pandemic. Approximately 5.3 million borrowers are currently in default, and collection measures may include wage garnishment and federal payment offsets via the Treasury Department. ABC7 Los Angeles+10AP News+10Business Insider+10
Understanding the Resumption of Collections
The Department of Education's decision to restart collections affects millions of borrowers. Involuntary collection methods, such as the Treasury Offset Program, will be employed to recover debts. This program allows the government to withhold tax refunds, Social Security benefits, and other federal payments from individuals with past-due debts. Additionally, wage garnishment is expected to commence later in the summer, following a required 30-day notice to borrowers. Business Insider+3WORLD+3USA TODAY+3Business Insider+4U.S. Department of Education+4Politico+4PBS: Public Broadcasting Service+1Politico+1Student Borrower Protection Center+2Politico+2PBS: Public Broadcasting Service+2
The Impact on Borrowers
The resumption of collections poses significant challenges for borrowers. Those in default may face lowered credit scores, wage garnishments, and the loss of Social Security benefits and tax refunds. The Department of Education plans to contact defaulted borrowers in the coming weeks to help them transition back into repayment. Borrowers are encouraged to explore options such as income-driven repayment plans and loan rehabilitation programs to regain good standing. NPR+10Business Insider+10Reuters+10Politico+1U.S. Department of Education+1
Historical Context
The pause on student loan collections began in March 2020 under the Trump administration as a temporary relief measure during the pandemic. While the Biden administration sought to implement broader student debt relief, these efforts faced legal challenges and political opposition. As a result, the Department of Education is now resuming collections to manage the loan program's fiscal responsibilities. AP News+1Politico+1Reuters
Borrower Options and Support
To assist borrowers, the Department of Education's Office of Federal Student Aid will provide resources and support. Borrowers are advised to contact the Default Resolution Group to discuss repayment options, enroll in income-driven repayment plans, or sign up for loan rehabilitation. These programs can help borrowers avoid wage garnishment and other collection actions. U.S. Department of Education+1Business Insider+1
Conclusion
The resumption of student loan debt collection marks a significant shift in federal policy. Borrowers in default should take proactive steps to understand their options and seek assistance to manage their debt effectively. Staying informed and engaged with the Department of Education's resources can help mitigate the impact of these changes.
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