The Department of Education is set to resume collection efforts on defaulted student loans starting next month, a move that includes the garnishment of wages for potentially millions of borrowers. This decision marks the end of a period of leniency that began during the COVID-19 pandemic. Since March 2020, no federal student loans, even those in default, have been referred for collection.
Currently, approximately 5.3 million borrowers are in default on their federal student loans. The department announced that beginning May 5, it will initiate involuntary collection measures through the Treasury Department’s offset program. This program will withhold payments from government sources, such as tax refunds, federal salaries, and other benefits, for those with outstanding debts to the government. After providing a 30-day notice, wage garnishment will also commence for borrowers in default.
Many borrowers have been preparing for the resumption of their loan obligations. In 2020, federal student loan payments and interest accrual were paused as a temporary relief measure. This pause was extended several times, with the final grace period for loan repayments concluding in October 2024. Consequently, tens of millions of Americans are now required to resume their payments.
Borrowers who fail to make payments for nine months enter default status, which is noted on their credit reports and can lead to collections. In addition to those already in default, approximately 4 million borrowers are currently between 91 to 180 days delinquent on their loan payments. Less than 40% of all borrowers are up-to-date on their student loans, according to department officials.
