The Department of Education will resume collections on defaulted federal student loans starting May 5. Over five million borrowers have been in default—some for more than seven years—since collections were paused in March 2020 during the onset of the COVID pandemic.
The Treasury Offset Program permits the U.S. government to withhold federal payments, such as tax refunds, from borrowers in default. Additionally, after a 30-day notice, wage garnishment may begin.
Education Secretary Linda McMahon stated, “American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies.” She asserted that the Biden administration lacked constitutional authority to cancel debt and that hundreds of billions have been shifted to taxpayers.
McMahon added that the department will work with the Department of Treasury to manage loans lawfully, helping borrowers return to repayment.
Defaulted borrowers will be contacted before May 5 and encouraged to enroll in an income-driven repayment plan or seek loan rehabilitation. Currently, only 38% of the over 45 million borrowers are current on their loans. Trump has criticized prior student loan forgiveness efforts.
Sources
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