The U.S. Department of Education announced that starting next month, it will resume the collection of federal student loans that are in default. This includes the potential garnishment of wages for millions of borrowers who have fallen behind on their payments.
Currently, around 5.3 million Americans are in default on their federal student loans. This decision follows a significant pause on collections that began during the COVID-19 pandemic, when no federal student loans were pursued for repayment since March 2020. The Trump administration initially halted loan payments as a temporary measure, and under President Biden, efforts were made to implement loan forgiveness that were often blocked by the courts.
Education Secretary Linda McMahon emphasized that taxpayers should not bear the burden of irresponsible lending practices. Beginning May 5, the department will implement involuntary collection methods through the Treasury Department, which may include withholding tax refunds and other government payments for individuals with overdue debts. They also plan to garnish wages after a notice period of 30 days.
While the administration believes this approach is necessary, critics argue that it could worsen financial struggles for many working families. Mike Pierce, from the Student Borrower Protection Center, called the move harsh and unnecessary.
Many borrowers have been preparing for their repayment obligations after an extended grace period. The past few years have seen a trend of increasing numbers of borrowers falling further behind, with less than 40% currently staying on top of their payments. In addition to those in default, about 4 million borrowers are significantly late on their payments.
For those in default, one option to prevent wage garnishment is entering a loan rehabilitation program, which requires the borrower to work with their loan servicer and make timely payments for a set period.
Despite the looming collection efforts, Biden’s administration had canceled student loans for over 5 million individuals, waiving more than $183.6 billion through various tailored forgiveness programs, though a broader relief plan faced legal scrutiny.
Secretary McMahon expressed that the administration’s past actions may have been too lenient and underscored the need for a more responsible approach in managing the student loan program, aiming both to protect borrowers and bolster the nation’s economic recovery.
