The administration under Donald Trump’s presidency says that it will resume collections on defaulted student loans for the first time since 2020, leaving millions of borrowers anxious across the nation. The U.S. Department of Education announced on April 21 that the office of Federal Student Aid will collect the defaulted student loans on May 5, which will take funds out of borrowers’ tax refunds, Social Security benefits, and also wages.
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Education Secretary Linda McMahon said, “Together, these actions will move the federal student loan portfolio back into repayment, which benefits borrowers and taxpayers alike.” In a press release on April 21, the Education Department said that it would send notices of wage garnishment (that could seize up to 15% of a borrower’s disposable income) later this summer. It is also urging borrowers in default to begin making monthly payments or enrol in an income-driven repayment plan overall.
According to the Department of Education, this change will affect 5.3 million borrowers across the U.S. who went into default before the pandemic. A borrower is considered in default when they fail to make a loan payment for a minimum of 270 days. More borrowers are negligent on their payments and may be pushed into default.
Scott Buchanan, executive director of the nonprofit trade group Student Loan Servicing Alliance says that “Most borrowers… they’re not in danger of default today, but in five months, they could be, and so taking action today is pretty important.”
{{/usCountry}}Scott Buchanan, executive director of the nonprofit trade group Student Loan Servicing Alliance says that “Most borrowers… they’re not in danger of default today, but in five months, they could be, and so taking action today is pretty important.”
{{/usCountry}}Many families are already struggling to maintain their livelihoods in today’s unstable economy, with the addition of tariffs that are making goods more expensive. Mike Pierce, the executive director of the Student Borrower Protection Center says that “families with student debt could soon start seeing some of their paycheck aor Social Security disappear.”
Pierce also added, “It's totally reasonable that people would be scared and confused and overwhelmed by the prospect of paying hundreds or thousands of dollars a month that they don't have.”