INDIANA – Starting May 5th, the Department of Education will resume involuntary collection efforts on defaulted federal student loans, potentially impacting millions of borrowers through wage garnishment, officials announced Monday. This marks the end of a pandemic-era pause that has been in place since March 2020.
Currently, approximately 5.3 million borrowers are in default on their federal student loans. Default occurs when borrowers fail to make payments for nine months, a status that negatively affects credit scores and can lead to collection actions. Alarmingly, an additional 4 million borrowers are reported to be between 91 and 180 days late on their loan payments, highlighting the widespread financial strain many individuals face. Department officials indicate that fewer than 40% of all student loan borrowers are currently up to date on their payments.
This decision by the Trump administration signals a firm stance on student loan repayment following a period of significant leniency during the COVID-19 pandemic. “American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” stated Education Secretary Linda McMahon.
The move comes after multiple attempts by President Joe Biden’s administration to implement broad student loan forgiveness were blocked by the courts. This history of shifting policies has drawn criticism from borrower advocates. They argue that the abrupt return to collections could create further hardship and confusion for borrowers who have already navigated a complex and uncertain landscape of student loan regulations over the past several years. The whiplash of changing policies between the Biden and Trump administrations, advocates contend, has left many borrowers struggling to understand their obligations and plan accordingly.
