The U.S. Department of Education has announced that it will resume collections on defaulted federal student loans starting Monday, May 5, 2025. This marks the first time since March 2020 that the government will actively pursue repayment from borrowers in default.
Over 5 million borrowers are currently in default, meaning they have not made payments for 270 days or more. Officials warn that the number of defaulted borrowers could rise to 10 million in the coming months. The outstanding federal student loan balance is approximately $1.6 trillion, spread across 43 million borrowers.
The Department of Treasury will begin garnishing wages for those who remain in default. Borrowers in default may have their federal tax refunds withheld. Some borrowers may see reductions in their Social Security benefits if they owe defaulted student loans. The government will use the Treasury Offset Program to collect overdue payments.
Officials argue that taxpayers should not bear the burden of unpaid student loans and that repayment must resume to prevent financial instability. Only 40% of borrowers are currently up to date on their loan repayments, while 60% are behind. Approximately 4 million borrowers are in late-stage delinquency, meaning they are 91 to 180 days late on payments.
Borrowers can enter a structured repayment plan to remove their loans from default status. Loan consolidation allows borrowers to combine their loans into a new federal loan, potentially lowering payments. Borrowers can enroll in income-driven repayment plans that adjust monthly payments based on income.
A bipartisan bill introduced in February 2025 would allow employers to contribute up to $5,250 tax-free toward employees’ student loans. The Department of Education is working with lawmakers to streamline loan repayment and lower college costs.
Sources:
https://www.ed.gov/about/news/press-release/us-department-of-education-begin-federal-student-loan-collections-other-actions-help-borrowers-get-back-repayment https://www.nbcnews.com/news/us-news/involuntary-collection-defaulted-student-loans-resume-education-depart-rcna202270 https://thehill.com/homenews/education/5259465-education-department-defaulted-federal-student-loans-debt-collection-trump-mcmahon
