Student loan collections begin; what that means for borrowers

WASHINGTON — Starting on May 5, the Department of Education once again start collections for student loans that are in default.

More than five million borrowers may be affected as of Monday, with more expected over the next several months, CNN reported.

About 43 million people owe money on their student loans, with student debt growing to $1.6 trillion over five years, NBC News reported.

President Donald Trump, in his first term, paused payments on most federal student loans in March 2020. The pause was extended by former President Joe Biden, but ended in 2023. Biden did extend the policy of not sending defaulted loans through late 2024, the Wall Street Journal reported.

But the policy referral came this year during Trump’s second term as he started to dismantle the Department of Education and do away with former Biden’s loan forgiveness policies.

If a federal student loan goes unpaid for 270 days, it is considered in default. It will affect your credit report.

All borrowers in default on their student loans should have been alerted by email by the Office of Federal Student Aid, telling them about the change in policy, NBC News reported.

You can check the status of your loans by accessing the Federal Student Aid website, even if you aren’t in default.

Along with listing the loans in default, the government restarted the Treasury Offset Program, which can garnish federal and state payments such as tax refunds and social security benefits, CNN reported.

The garnishment will start in about 30 days, according to the Wall Street Journal.

The government can withhold all federal tax refunds and up to 15% of a federal employee’s disposable pay. Those affected should get letters this summer, according to NBC News.

Later this summer, the administrative wage garnishment, which will allow the garnishment of non-federal employee wages, to pay off defaulted loans.

If you are in default, by making nine, voluntary, without missing one over 10 months, you can rehabilitate your loan. You can only do that once. To do so, you must have an agreement in writing from your loan company, which will set the payment amount. You must provide documentation of your income and then the payment will be 10% or 15% of your discretionary income divided by 12, according to CNN.

If you were in wage garnishment, it will continue until at least five of the nine payments are made.

You can also enroll in an income-driven repayment plan, loan consolidation and or contact the Default Resolution Group to make a payment.

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