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The U.S. Department of Education has recently declared that the Office of Federal Student Aid will recommence the process of “involuntary collections” for defaulted federal student loans, starting on May 5, 2025. This significant move comes after a period without collections since March 2020.
Collections will be conducted through the Treasury Offset Program. This program allows the federal government to withhold certain payments, including tax refunds, Social Security benefits, and federal salaries, in an effort to recover past-due debts owed to the government.
U.S. Secretary of Education Linda McMahon emphasized the need for accountability, stating, “American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies.” She criticized the previous administration for what she described as misleading borrowers about the reality of debt cancellation under executive authority.
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Prior to this announcement, the Biden administration had implemented a pause on student loan collections as part of the response to the Covid-19 pandemic, which ended in September 2023. Following this period, an additional one-year grace period was provided to borrowers to help mitigate the effects of missed payments.
According to data from the Education Department, over 5 million borrowers are currently classified as being in default, while an additional 4 million are in “late-stage delinquency,” meaning they are more than 90 days overdue on their payments.
The Department plans to notify all borrowers in default through email communications from the Office of Federal Student Aid within the next two weeks. Affected individuals will have the option to reach out to the Default Resolution Group to either set up monthly payments, enroll in an income-driven repayment plan, or initiate loan rehabilitation.
Failure to address these defaults may result in borrowers being subjected to “involuntary collections” and potentially lead to administrative wage garnishment.
Higher education expert Mark Kantrowitz noted the unique challenges faced by borrowers who graduated during the pandemic, highlighting their lack of experience with loan repayment. He stressed the importance of providing comprehensive education about borrowers’ rights and responsibilities within the loan repayment process, stating, “Payment is due even if you are dissatisfied with the quality of the education you received.”
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