Department of Education Will Begin Collecting on Defaulted Student Loans
As of May 5, 2025, the U.S. Department of Education will restart collection efforts on federal student loans that are in default, impacting approximately 5.3 million borrowers. This move ends a period of leniency that began in March 2020, during the COVID-19 pandemic, when no federal student loans were referred for collection.
The collection process will involve the Treasury Department’s offset program, which can withhold government payments, such as tax refunds, federal salaries, and other benefits, from individuals with overdue federal debts. Additionally, after providing a 30-day notice, the department will commence wage garnishment for those in default.
Education Secretary Linda McMahon stated, "American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies."
However, critics argue that framing student debt as a moral failing overlooks the structural issues, such as skyrocketing tuition, wage stagnation, and predatory loan servicing, that led many into debt in the first place.
The original pause on federal student loan payments and interest accrual was implemented by President Donald Trump in 2020 as a relief measure during the pandemic. This pause was extended multiple times through 2023, with a final grace period concluding in October 2024. Consequently, tens of millions of Americans have resumed their loan payments.
What Happens Next
Borrowers are deemed in default after failing to make payments for nine consecutive months. Once in default, their credit scores are damaged, making it harder to rent apartments, secure employment, or qualify for auto loans. With the return of debt collections, that financial instability could quickly snowball.
Although the Biden administration launched the "SAVE" program to help borrowers exit default and restore their repayment status, many advocates worry that the public isn’t fully informed—or prepared.
