As of May 5, 2025, the U.S. Department of Education has resumed collections on defaulted federal student loans, ending a five-year pause initiated during the COVID-19 pandemic. This action affects approximately 5 million borrowers in default, with another 4 million in late-stage delinquency. Consequences for defaulted borrowers include wage garnishment, tax refund seizures, and reductions in Social Security benefits.

Recent data from TransUnion indicates that 20.5% of 19.6 million student loans are at least 90 days past due, marking a record high. Notably, nearly a quarter of these delinquent borrowers had prime credit scores before falling behind, leading to significant drops in their credit ratings. 

Borrowers in default can regain good standing through loan rehabilitation, which involves making nine on-time payments or consolidation. However, challenges persist, including a backlog of 1.8 million income-driven repayment applications and ongoing legal uncertainties surrounding repayment plans.

The resumption of collections has raised concerns among consumer advocates, who argue that the abrupt restart, amid administrative challenges, places undue hardship on borrowers unprepared for the change.

For those affected, verifying loan statuses, contacting loan servicers or the Default Resolution Group, and exploring income-driven repayment plans to mitigate potential financial repercussions is crucial.