Student Loan Collections Restarting May 5—Here’s What to Know

‘Debt doesn’t go away; it gets transferred to others,’ Education Secretary Linda McMahon said.

Students earning degrees at Pasadena City College participate in the graduation ceremony in Pasadena, Calif., on June 14, 2019. Robyn Beck/AFP via Getty Images

The Department of Education on May 5 will resume collections for the first time in five years of federal student loans in default, impacting some 5 million borrowers.

Since March 2020, the department has not collected on default loans. When Congress mandated student and parent borrowers to resume student loan payments in October 2023, the previous administration granted borrowers another year to be protected from the negative effects of missed payments. Former President Joe Biden also did not lift the collections freeze.

This will now change beginning in May, Education Secretary Linda McMahon said on April 21.

“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” McMahon said in a statement. “The Biden Administration misled borrowers: the executive branch does not have the constitutional authority to wipe debt away, nor do the loan balances simply disappear.”

According to the department, 42.7 million borrowers currently owe more than $1.6 trillion in student loan debt.

Here’s what borrowers need to know.

Restarting the Treasury Offset Program

The Office of Federal Student Aid will restart the Treasury Offset Program, administered by the Treasury Department.

All borrowers may already have received, or will soon receive, email communications from the Office of Federal Student Aid requesting that they contact the Default Resolution Group to enroll in an income-driven repayment plan, sign up for loan rehabilitation, or make a monthly payment.

The department confirmed that it will add weekend hours to the Office of Federal Student Aid’s call center operations, starting in May. It will also create a “loan simulator” to calculate repayment plans and employ an artificial intelligence assistant to help borrowers devise a financial strategy.

A defaulted loan is a loan for which borrowers have not made payments for 270 days or more.

Wage Garnishment

Borrowers who remain in default could eventually see their earnings garnished.

The federal government possesses enormous collection powers over federal debts, allowing officials to seize up to 15 percent of borrowers’ disposable income.

In a press release, the Education Department said it will send notices regarding wage garnishment later this summer.

“Borrowers who don’t make payments on time will see their credit scores go down, and in some cases their wages automatically garnished,” McMahon wrote in a Wall Street Journal op-ed on April 21.

In March, Federal Reserve Bank of New York economists stated that more than 9 million student loan borrowers who are late on their payments could face “significant drops” in their credit scores this year.

They estimate that some borrowers could witness their credit scores decline by as much as 171 points.

“Although some of these borrowers may be able to cure their delinquencies, the damage to their credit standing will have already been done and will remain on their credit reports for seven years,” New York Fed economists wrote in a March 26 paper.

Repayment, Consolidation, or Rehabilitation

Student loan borrowers generally have three ways to get out of default.

First, they can repay the loans in full.

Second, they can consolidate their loans, which will allow them to repay defaulted loans with new repayment terms.

Third, they can request loan rehabilitation, which can take the loan out of default and remove the default line from borrowers’ credit reports. However, there is a caveat: Individuals must make multiple consecutive on-time payments of a prearranged amount.

Protecting Taxpayers

Why is the Trump administration restarting federal student loan collections?

U.S. officials have stated that the former president did not have the authority to forgive student loans, and that resuming collection is necessary to protect taxpayers from shouldering the costs of loans that students accepted.

“Debt doesn’t go away; it gets transferred to others,” McMahon wrote. “If borrowers don’t pay their debts to the government, taxpayers do.”

Secretary of Education Linda McMahon attends the International Women of Courage Awards Ceremony at the State Department in Washington on April 1, 2025. Brendan Smialowski/AFP via Getty Images

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, agrees with the department’s actions.

“While a short repayment pause was justifiable early in the pandemic, that was five years ago—and it makes no sense today,” MacGuineas said in a statement.

“The administration is taking the right approach by restarting repayments in earnest and conducting a creative and aggressive outreach strategy to make sure borrowers understand their obligations.”

Mike Pierce, executive director of the Student Borrower Protection Center, said the new effort is “cruel, unnecessary, and will further fan the flames of economic chaos for working families across this country.”

“Since February, Donald Trump and Linda McMahon have blocked these borrowers’ path out of default and are now feeding them into the maw of the government debt collection machine,” Pierce said in a statement.

The Numbers

Officials estimate that as many as 10 million borrowers could default in the coming months. Approximately 5 million borrowers have not completed a payment in 360 days and are in default, and another 4 million borrowers are in late-stage delinquency (91 to 180 days).

If this occurs, about a quarter of the federal student loan portfolio will be in default.

“Only 38 percent of borrowers are in repayment and current on their student loans,” the department said. “Most of the remaining borrowers are either delinquent on their payments, in an interest-free forbearance, or in an interest-free deferment. A small percentage of borrowers are in a 6-month grace period or in-school.”