The Trump administration announced Monday it will start the process of collecting on defaulted federal student loans on May 5.
The Treasury Offset Program, which collects debts by intercepting payments such as tax refunds and Social Security benefits, will administer the collections.
Following a required 30 day notice to borrowers, wage garnishment will start later this summer, a senior Education Department official said Monday on a call with reporters.
Key context: No federal student loan has been referred to collections since March 2020 when the Education Department paused federal student loan payments and collections during the Covid-19 pandemic.
About 5.6 million borrowers were in default at the end of 2024. Most federal student loan borrowers will go into default if they do not make a payment in more than 270 days.
Only 4 out of 10 borrowers are current on their student loans, Education Department officials said Monday. Thirty five percent of borrowers are 60 days delinquent and about 4 million borrowers are 91 to 180 days delinquent.
Defaulted borrowers can lose eligibility to receive additional federal student aid and experience legal consequences.
What’s next: Department officials said they will begin a “robust communication strategy” consisting of sending a series of emails to defaulted borrowers to let them know about the Treasury Offset Program and urge them to look into several repayment options.
Borrowers will be encouraged to enroll in income-driven repayment programs or participate in loan rehabilitation, which requires making a certain number of consecutive, on-time loan payments to get out of default, among other options.
The department said it made several tools available to borrowers, such as an artificial intelligence assistant to help with finding a repayment program, and extended loan servicers’ call center hours.
The agency has said it plans to work with Washington to bring borrowers out of default.
“We’re looking forward to working with Congress on their efforts to streamline loan repayment as well as lowering college costs,” a senior official said. “And you’ll hear a lot about this over the next few weeks.”
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