Starting Monday, May 5, the federal government will resume collecting payments on defaulted student loans — the first time since the pandemic pause began in March 2020. This change affects millions of borrowers and marks the end of the years-long break on collections.
📌 What’s Changing?
The U.S. Department of Education will begin recovering unpaid federal student loans by using the Treasury Offset Program — a system that can withhold money from:
- Tax refunds
- Wages
- Social Security and other government benefits
Only about one-third of 43 million borrowers have consistently made payments since the pandemic-era pause, according to officials.
💸 Why Are Collections Resuming?
Education Secretary Linda McMahon said in an official release that this move is intended to protect taxpayers from bearing the cost of unpaid student loans, which now total around $1.6 trillion.
“Taxpayers should not be responsible for unpaid student loans,” McMahon said.
The announcement follows years of debate over student debt forgiveness and comes during a time of high inflation and rising living costs, which many say are already straining families.
⚠️ Advocates Warn of Financial Crisis
Sabrina Calazans, Executive Director of the Student Debt Crisis Center, criticized the decision, warning that millions of people may struggle to afford basic needs.
“We’re in the worst student loan environment ever,” she said. “This could lead to a financial crisis for many families.”
📬 What Borrowers Should Do Now
Borrowers in default should have received an email from Federal Student Aid (FSA) explaining the next steps. Options include:
- Setting up monthly payments
- Enrolling in an income-driven repayment plan
- Starting loan rehabilitation — a program that removes default status after making a series of on-time payments
To get started, borrowers need to contact the Default Resolution Group and may need to send their latest Federal 1040 tax return.
The government also plans to begin garnishing wages later this summer. Federal workers could see up to 15% of their disposable pay withheld if they don’t make payment arrangements.
📉 Consequences of Missed Payments
According to McMahon, missed payments can hurt your credit score and result in automatic wage garnishment.
“Debt doesn’t just disappear — someone always pays. If it’s not the borrower, it’s the taxpayers,” she said in a Wall Street Journal article.
❌ No More Mass Loan Forgiveness
While the Biden administration forgave student loans for over 5 million people, including public service workers and students from fraudulent schools, the new Education Department made it clear that mass debt cancellation is off the table.
McMahon stated that Biden’s previous loan forgiveness plan was unconstitutional and created confusion among borrowers. In 2023, the Supreme Court blocked Biden’s plan to cancel up to $20,000 in debt per borrower, which would have cost the government over $400 billion.
“Forgiveness on a large scale isn’t fairness — it’s shifting the burden to taxpayers,” McMahon said.
