Collection of defaulted student loan to restart
By: Zachary Schermele
USA Today
WASHINGTON - Since the pandemic, federal student loan borrowers have been mostly protected from the harshest consequences of not paying back their loans.
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That's about to change, and quickly.
..... The Education Secretary Linda McMahon said the federal government will resume involuntary collections for borrowers in default on May 5. [2205]
..... Loan holders will then state the process of taking money from the paychecks of borrowers who've missed their payments for 270 days or more. they'll also start moving to collect from other federal payments, including tax refunds and Social Security benefits.
..... The change, which McMahon unveiled on April 21 [2025] and has been expected for months, represents the last major cog in the wheel of the student loan repayment system to start spinning again since the coronavirus pandemic.
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Collection for defaulted borrowers - of which there are more than 5 million - have been paused since March 2020. Under former President Joe Biden, monthly student loan bills resume in the fall of 2023 after a year-long break.
..... But collecting on loans, the harshest penalty for borrowers, still hadn't restarted by the time President Donald Trump took office a second time. During the Biden administration, the Education Department pushed off recommencing involuntary collections until after the 2024 presidential election.
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As court battles wage over the future of major repayment programs, much of the federal student loan system remains at a standstill. Just over a third of borrowers, 38%, are in repayment and current on their student loans, according to the Education Department. More than 40 million Americans still owe payments on their federal student loans.
..... Roughly 2 million borrowers are in interest-free forbearance - meaning they don't have to pay back their loans indefinitely - while the courts decide the legality of the Saving on a Valuable Education, or SAVE, plan. The Biden administration called the program, which based monthly bills on borrowers' incomes, the "most affordable repayment plan ever."
..... On April 21, [2025] McMahon accused the Biden administration of misleading borrowers and said she would "shepherd the student loan program responsibly."
..... "American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies," she said in a statement.
..... Advocates for borrowers denounced the change. Mike Pierce, the executive director of the Student Borrower Protection Center, said federal law gives borrowers the right to make payments they can afford.
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Yet many of the programs that make such afford ability possible, he pointed out, have been paused by litigation or threatened since Trump took office.
..... All borrowers in default will be notified of their status by email over the next two weeks, Education Apartment officials said.
..... The agency will urge borrowers in those emails to either pay their bills, enroll in an income-driven repayment plan, or sign up for loan rehabilitation or consolidation.