Putting a final end to a five-year pause that shielded defaulters from financial consequences, the Trump administration restarted federal student loan collections today.
Millions of borrowers who defaulted on their student loans now face wage garnishment, tax refund seizure, and even the withholding of Social Security benefits as the government reclaims unpaid debt.
Education Secretary Linda McMahon firmly stated that “American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies.”
The resumption of collections marks a significant shift and returns to a focus on fiscal responsibility.
It also signals a clean departure from the Biden administration’s attempts to forgive student debt, which the Supreme Court ultimately blocked.
The consequences for borrowers are immediate and potentially severe.
Those who have missed payments for 270 days or more are considered in default, triggering the government’s extraordinary collection powers.
The Treasury Department’s Offset Program will begin intercepting tax refunds immediately, with wage garnishment set to follow this summer.
The federal government’s collection powers far exceed those of private lenders.
Federal authorities can seize up to 15% of a worker’s disposable income without a court order, capture entire tax refunds, and even take portions of Social Security checks.
The numbers are staggering. Student debt has ballooned to $1.6 trillion over the last five years, with roughly 5 million borrowers in default and another 4 million at least 90 days late on payments.
Many of these borrowers will see their credit scores plummet, which will increase costs for mortgages, car loans, and credit cards at a time when many American families are already struggling with inflation.
Some borrowers expressed shock at the resumption of collections. “I wanted to throw up because I already live paycheck to paycheck,” said Kat Hanchon, one of millions facing potential financial hardship.
“I couldn’t even afford the like $55 that they were trying to charge me…because it’s that tight of a budget,” Hanchon added.
Critics like Student Borrower Protection Center executive director Mike Pierce argue the move “will further fan the flames of economic chaos for working families across this country.”
Options do exist for borrowers facing collections. The Education Department offers assistance through its Default Resolution Group, where borrowers can explore loan rehabilitation by making nine consecutive on-time payments.
Other options include income-based repayment plans, deferment, forbearance, or consolidation.
Financial experts urge borrowers to check their loan status and update contact information immediately.
McMahon emphasized that resuming collections is an act of fairness, as unpaid debt ultimately affects all taxpayers.
This approach starkly contrasts the previous administration’s attempts to simply cancel debt, shifting the burden to working Americans who either paid off their loans or never took them in the first place.
