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Home » US student loans in default to be referred to debt collection
Education

US student loans in default to be referred to debt collection

adminBy adminApril 21, 2025No Comments3 Mins Read
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WASHINGTON (AP) — The Education Department will begin collection next month on student loans that are in default, including the garnishing of wages for potentially millions of borrowers, officials said Monday.

Currently, roughly 5.3 million borrowers are in default on their federal student loans.

The Trump administration ‘s announcement marks an end to a period of leniency that began during the COVID-19 pandemic. No federal student loans have been referred for collection since March 2020, including those in default.

“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” Education Secretary Linda McMahon said.

Beginning May 5, the department will begin involuntary collection through the Treasury Department’s offset program, which withholds payments from the government — including tax refunds, federal salaries and other benefits — from people with past-due debts to the government. After a 30-day notice, the department will also begin garnishing wages for borrowers in default.

Already, many borrowers have been bracing for obligations coming due.

In 2020, President Donald Trump paused federal student loan payments and interest accrual as a temporary relief measure for student borrowers. The pause in payments was extended multiple times through 2023, and a final grace period for loan repayments ended in October 2024. That meant tens of millions of Americans had to start making payments again.

Borrowers who don’t make payments for nine months go into default, which is reported on their credit scores and can go to collections.

In addition to the borrowers already in default, around another 4 million are between 91 to 180 days late on their loan payments. Less than 40% of all borrowers are current on their student loans, department officials said.

President Joe Biden oversaw the cancellation of student loans for more than 5 million borrowers. Despite the Supreme Court’s rejection of his signature proposal for broad relief, he waived more than $183.6 billion in student loans through expanded forgiveness programs.

In her statement Monday, McMahon said Biden had gone too far.

“Going forward, the Department of Education, in conjunction with the Department of Treasury, will shepherd the student loan program responsibly and according to the law, which means helping borrowers return to repayment — both for the sake of their own financial health and our nation’s economic outlook,” she said.

___

The Associated Press’ education coverage receives financial support from multiple private foundations. AP is solely responsible for all content. Find AP’s standards for working with philanthropies, a list of supporters and funded coverage areas at AP.org.



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