Millions of Americans with federal student loans could face serious consequences starting May 5, 2025, as the U.S. Department of Education restarts involuntary debt collections for the first time in five years.
The resumption means borrowers who are behind on their payments could see their wages garnished, tax refunds seized, and Social Security benefits withheld—all without a court order. It also opens the door to a surge in scams targeting confused and vulnerable borrowers.
Here’s what you need to know to protect yourself and stay ahead of the May 5 deadline.
What happens when student loan collections restart?
Borrowers who are in default—typically after 270 days of missed payments—will face “involuntary collections” through the Treasury Offset Program and wage garnishment.
Under federal law, the government can:
- Withhold up to 100% of federal tax refunds
- Garnish up to 15% of wages
- Seize up to 15% of Social Security or Railroad Retirement benefits
- Withhold 25% of federal retirement payments
- Take 100% of certain federal payments, like vendor and travel reimbursements
The Education Department also authorized guaranty agencies to resume collection activities on loans under the older Federal Family Education Loan (FFEL) Program.
How this policy differs under the Trump administration
Education Secretary Linda McMahon defended the move in a Wall Street Journal opinion piece, saying that “borrowing money and failing to pay it back isn’t a victimless offense.”
Experts note, however, that the Trump administration has been more aggressive about minimizing forbearance options compared to previous administrations. Borrowers could find it harder to delay or modify payments, and fewer leniency options may be offered.
“The goal appears to be shrinking the number of borrowers in temporary forbearance,” said Jonathan Collins, an education policy professor at Teachers College, Columbia University.
Scams surge as student loan collections resume
As millions scramble to avoid garnishments, scammers are targeting borrowers with false promises of loan forgiveness, payment protection, or “immediate relief.”
According to RoboKiller, Americans lost an estimated $5 billion to student loan scams in 2022, and experts warn the number could rise sharply in 2025.
Common scam tactics include:
- Promising immediate or total loan forgiveness
- Charging upfront or monthly fees for “help”
- Requesting your FSA ID and password
- Pushing fake deadlines to create urgency
- Sending messages full of grammar and spelling errors
Legitimate help, like enrolling in an income-driven repayment plan or consolidating loans, is always free through your official loan servicer.
If you suspect you’ve been targeted, report it to the Federal Trade Commission (FTC), the Consumer Financial Protection Bureau (CFPB), or the Department of Education’s fraud hotline.
How borrowers can protect themselves
Experts recommend taking these steps immediately:
- Check your loan status: Log into your Federal Student Aid account to confirm whether your loans are current, in default, or eligible for assistance.
- Explore repayment options: Income-driven repayment (IDR) plans, consolidation, and rehabilitation programs can reduce payments or bring loans out of default.
- Act before May 5: Once collections begin, your options become much more limited.
- Beware of scams: Work only with official federal loan servicers. Never share your FSA ID or pay upfront fees for assistance.
- Contact elected officials: Advocates recommend reaching out to lawmakers to urge oversight of federal student loan policies during this transition.
Why this matters now
Confusion remains high. After years of pandemic-era pauses, many borrowers are unaware that collections are restarting. Others may have unknowingly defaulted after the temporary “on-ramp” period ended in September 2024.
“This could not have come at a worse time,” said Khandice Lofton, counsel at the Student Borrower Protection Center. “Borrowers are already struggling with rent, groceries, and medical bills.”
Experts estimate that more than 9 million borrowers are now at risk.
As Nicholas Hillman, a University of Wisconsin professor, put it: “The loan repayment system is fundamentally broken—and borrowers shouldn’t be forced to pay the price for government dysfunction.”
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