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Student Loan Collections to Resume for Millions in Default, Including Wage Garnishment

by poligirlsayswhat
April 21, 2025
Reading Time: 2 mins read
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Student Loan Collections to Resume for Millions in Default, Including Wage Garnishment

Student Loan Forgiveness

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Federal student loan collections are set to resume next month for the first time since 2020, with the U.S. Department of Education confirming plans to begin garnishing wages and withholding tax refunds from borrowers in default.

The announcement, made Monday by Education Secretary Linda McMahon, marks the end of a pandemic-era freeze that shielded millions of borrowers from debt collection efforts. Beginning May 5, the department will reinitiate its partnership with the Treasury Department to collect past-due student debt through involuntary means, including the federal offset program and wage garnishment.

Roughly 5.3 million borrowers are currently in default on their federal student loans. An additional 4 million are considered at risk, with their accounts more than 90 days past due. According to department data, less than 40 percent of all borrowers are current on their loans.

“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” McMahon said in a statement. “It’s time to return the program to a place of fiscal responsibility.”

Borrowers who fail to make payments for nine consecutive months are considered in default. Once in default, loans may be sent to collections and negatively impact borrowers’ credit histories. Through the Treasury offset program, the government can intercept tax refunds, federal salaries, and other payments to collect on unpaid debt.

Borrowers will receive a 30-day advance notice before wage garnishment begins.

Student loan payments and interest were first paused in March 2020 under then-President Donald Trump as a temporary relief measure during the COVID-19 pandemic. The pause was extended several times under both the Trump and Biden administrations. A final grace period ended in October 2024, prompting the return to active repayment for tens of millions of borrowers.

While President Joe Biden’s broader debt cancellation plan was blocked by the U.S. Supreme Court, his administration has still approved more than $183 billion in targeted student loan forgiveness through expanded programs. More than 5 million borrowers have had their loans fully or partially canceled.

However, McMahon said the previous administration’s actions went too far.

“Going forward, the Department of Education, in conjunction with the Department of Treasury, will shepherd the student loan program responsibly and according to the law,” she said.

Borrowers currently in default can explore options to rehabilitate their loans or enter income-driven repayment plans to avoid garnishment or other penalties. More information is expected to be provided by the department ahead of the May 5 enforcement date.

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