Student Loan Collections Resume May 5—What You Need To Know
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Topline The Trump administration will resume debt collections for federal student loan borrowers who have defaulted on their debt starting May 5, putting millions of borrowers at risk of having federal payments or portions of their salaries withheld in the coming months as the White House said it “can and will” take borrowers’ wages, pensions and tax refunds. Secretary of Education Linda McMahon at the White House on April 16. Getty Images Key Facts The Department of Education said it will resume collections on defaulted loans in the federal student loan portfolio, which includes Federal Family Education Loans, Direct Loans, Perkins Loans and Pell Grants, among others. Debt collections will resume on May 5, when the Trump administration will restart the Treasury Offset Program that allows the government to withhold various federal payments—like tax refunds, federal salaries and Social Security payments—to those with federal debt. Defaulting on student loans happens when borrowers haven’t paid their loans for a certain amount of time—which in most cases is 270 days, or approximately nine months—at which point the entire amount they owe, plus interest, becomes due. The move will impact millions of borrowers, as the Education Department said more than five million borrowers are already in default on their loans, and an additional four million borrowers are in “late-stage delinquency,” meaning they’re not making payments and are nearing the point when they’ll be considered in default. Collections on student loan debt had previously been on pause since the COVID-19 pandemic began in March 2020, the agency said. The government will also start sending out notices “later this summer” informing borrowers who have defaulted about wage garnishment, in which the federal government can have up to 15% of borrowers’ salaries withheld to pay back their debts. Crucial Quote “Borrowers will now be expected to…
Filed under: News - @ April 29, 2025 5:28 pm