Millions of borrowers will start seeing student loan collections resume on May 5, as the federal government restarts efforts to recover payments on defaulted loans, which were paused during the pandemic.
Why It Matters
The U.S. Education Department hasn’t collected defaulted student loans since March 2020. According to officials, out of the nearly 43 million Americans with student debt, only about a third have consistently made payments.
Now, the Treasury Department will begin recovering debt using its Offset Program, which allows the government to take money from tax refunds, wages, and even Social Security benefits to cover overdue loans.
What Borrowers Should Know
All borrowers in default should have received a notice from the Federal Student Aid office, explaining the changes and urging them to take action. Borrowers are encouraged to:
- Set up a monthly payment plan
- Join an income-driven repayment plan
- Apply for loan rehabilitation — a process that removes default status after making several on-time payments.
To start, borrowers must submit their latest federal tax return if there haven’t been changes to their income or marital status.
How the Government Will Collect
Under the Offset Program:
- The entire federal tax refund can be withheld.
- Up to 15% of a federal worker’s paycheck may be taken.
- Social Security payments can also be reduced.
The FSA plans to start sending wage garnishment notices this summer.
Credit Impact
If borrowers don’t resume payments, their credit scores may drop. In some cases, wages will be garnished automatically, according to Education Secretary Linda McMahon.
No More Broad Loan Forgiveness
While the Biden administration canceled loans for over 5 million people—including those defrauded by schools or working in public service—widespread debt forgiveness is now off the table.
McMahon emphasized that the executive branch can’t legally erase student loans and called Biden’s earlier relief efforts unconstitutional. She argued that resuming collections is a matter of fairness, saying:
“Debt doesn’t disappear. If borrowers don’t pay, the taxpayers carry the burden.”
Looking Ahead
Borrowers now face a challenging financial landscape, with inflation and rising living costs making repayment even harder. Advocacy groups like the Student Debt Crisis Center warn that renewed collections may cause economic hardship for millions.
