US to Restart Student Loan Collections in May
Federal officials will resume collecting on defaulted student loans starting May 5, potentially affecting 5.3 million borrowers with wage garnishment and tax refund seizures, the Education Department announced Monday.
Secretary Linda McMahon said the decision ends a five-year pause initiated during the pandemic, declaring that taxpayers should no longer bear responsibility for what she called unsound lending practices.
The resumption involves Treasury Department seizures of tax refunds, federal salaries, and benefits for past-due borrowers. Wage garnishment will commence after a mandatory 30-day notice period.
This policy reversal comes six months after October 2024’s expiration of the last repayment grace period. Federal loan payments were first suspended by President Trump in 2020 as pandemic relief and extended through 2024 under Biden.
Federal data indicates another 4 million borrowers are between three and six months behind on payments. Overall, under 40% of borrowers are meeting their obligations, officials reported.
Communication challenges have intensified following recent staff reductions at Federal Student Aid offices, while a February court decision blocking certain repayment plans has created additional uncertainty, noted Kristin McGuire of Young Invincibles. Some borrowers were placed in interest-accruing forbearance as application systems were temporarily offline.
Borrowers facing garnishment have limited options, including one-time loan rehabilitation requiring nine months of consistent payments calculated based on verified income, explained Betsy Mayotte of The Institute for Student Loan Advisors.
The restart contrasts sharply with Biden-era policies that eliminated over $180 billion in debt for 5 million borrowers through various programs, despite the Supreme Court rejection of broader forgiveness plans.
McMahon stated the department would now manage the program according to existing law, prioritizing borrower repayment as essential for individual financial wellness and national economic health.
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