After a years-long pause, the federal government will restart student loan collections beginning May 5, 2025.
Over five million Americans who are currently in default could be impacted. Borrowers who have missed payments for more than 270 days now face serious penalties, including wage garnishment, seizure of tax refunds, and loss of Social Security benefits.
Why student loan collections are resuming
The U.S. Department of Education, under Secretary Linda McMahon, confirmed the policy change on April 21.
“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” McMahon said, signaling the final step in the return to pre-pandemic loan enforcement.
Involuntary collections had been on hold since March 2020 due to COVID-19 emergency relief measures.
Who will be affected?
Borrowers who defaulted on their federal student loans — defined as missing payments for at least 270 days — are at immediate risk. Notices will be sent via email to all affected individuals in the coming weeks.
Borrowers can avoid penalties by:
- Resuming loan payments
- Enrolling in an income-driven repayment plan
- Applying for loan rehabilitation or consolidation
Failing to take action could result in automatic deductions from wages or tax returns.
What advocates are saying
Critics, including the Student Borrower Protection Center, condemned the move.
“This is cruel, unnecessary and will further fan the flames of economic chaos for working families across this country,” said Mike Pierce, the center’s executive director.
He blamed political leadership changes for ending key protections, especially as economic uncertainty remains high for many Americans.
Status of student loan repayment programs
Although regular student loan payments resumed in fall 2023, collections for defaulted borrowers had remained paused—until now.
Additionally, more than 2 million borrowers are currently in interest-free forbearance as courts weigh the fate of President Biden’s SAVE repayment plan. The plan, designed to cap monthly payments based on income, faces ongoing legal challenges.
According to the Education Department:
- 38% of borrowers are current on their loans
- Over 40 million Americans still owe federal student loan debt
What to do if you’re in default
Borrowers in default should act quickly to explore their options:
- Loan rehabilitation: Make nine consecutive monthly payments to restore loans to good standing.
- Loan consolidation: Combine defaulted loans into a new Direct Consolidation Loan.
- Income-driven repayment: Lower monthly payments based on current income.
Taking proactive steps could prevent serious financial consequences and help borrowers regain control over their debt.
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