(Crankers) The Trump administration plans aggressive debt collection efforts on defaulted federal student loans, ending a five-year pause initiated during the COVID-19 pandemic. This move affects approximately 5.3 million borrowers currently in default and could lead to wage garnishment.
Approximately 195,000 borrowers have already received notice that their federal benefits, such as tax refunds, will be garnished starting in early June. Later this summer, the Department plans to begin administrative wage garnishment, requiring employers to withhold a portion of a borrower’s paycheck to repay defaulted student loans.
Education Secretary Linda McMahon emphasized the need to address the root issues of the higher education finance system, criticizing rising tuition costs and inadequate student outcomes. The Department plans to increase transparency by publishing loan non-payment rates by institution to better hold colleges accountable. McMahon urged proactive outreach and improved counseling efforts to support borrowers and reduce defaults.
Borrowers who fail to make timely payments risk serious financial consequences, including credit damage, wage garnishment, tax refund seizure, and reductions in Social Security benefits. A recent report highlights that over 20% of borrowers are 90 days or more overdue on payments, a significant increase from pre-pandemic levels.
The Department of Education encourages affected borrowers to contact the Default Resolution Group to explore repayment options such as income-driven repayment plans, loan rehabilitation, or making monthly payments, as reported in a news article.
Congress is currently working on a comprehensive legislative package proposed by President Trump, which includes overhauls to student loan repayment by simplifying plans and increasing repayment burdens tied to income. This legislation aims to save \$330 billion and is expected to reach the Senate for negotiation by July 4.
The resumption of student loan collections marks a significant shift in federal policy, with the Trump administration emphasizing borrower responsibility and institutional accountability. Borrowers are urged to proactively engage with loan servicers to explore available repayment options and avoid potential financial penalties.