The U.S. Department of Education announced it will resume collecting on defaulted federal student loans starting 5 May, ending a five-year pause that began during the pandemic. The move could see the wages of more than five million Americans garnished, along with the withholding of tax refunds and federal benefits.
The Education Department said it will resume referrals to the Treasury Department’s offset programme. This system allows the government to recoup overdue debts by deducting money from federal payments, including income tax refunds and Social Security benefits. After a 30-day warning, wage garnishments will begin.
"American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies," said Education Secretary Linda McMahon in a statement. She said the restart will be managed jointly with the Treasury Department and framed it as a step towards “financial health” for borrowers and the nation.
Pandemic relief ends, but confusion remains
Student loan collections were halted in March 2020 under President Donald Trump as a temporary relief during COVID-19. The pause was extended multiple times by President Joe Biden and formally ended in October 2024. Since then, repayment obligations have gradually returned, but clarity has not.
About 5.3 million borrowers are already in default, while another 4 million are between 91 and 180 days late. Only 40% of federal borrowers are up to date on their payments, according to department officials.
For many, navigating the system has become more difficult. Kristin McGuire, executive director of Young Invincibles, a youth advocacy group, pointed to layoffs at the Federal Student Aid office: “Things are really difficult to understand right now. Things are changing every day,” she said. “We can’t assume that people are in default because they don’t want to pay their loans. People are in default because they can’t pay their loans and because they don’t know how to pay their loans.”
Backlash from borrower advocates
The announcement has been criticised by groups representing borrowers, who say the sudden shift in enforcement is unfair and poorly timed.
“This is cruel, unnecessary and will further fan the flames of economic chaos for working families across this country,” said Mike Pierce, executive director of the Student Borrower Protection Center.
The organisation also cited the broader financial climate — from inflation to recent federal job losses — as a reason to reconsider. “The announcement also comes as Americans are navigating unprecedented economic uncertainty,” the centre said in a statement.
One-time shot at recovery: the rehabilitation path
Borrowers who want to avoid wage garnishment can enter into loan rehabilitation. Betsy Mayotte, president of The Institute for Student Loan Advisors, said this route allows defaulted borrowers to get back on track by making nine consecutive on-time payments.
To enrol, a borrower must contact their loan servicer and provide documentation of their income and expenses. The programme is available only once.
Biden’s mixed legacy on student debt relief
President Biden cancelled over $183 billion in student loans, aiding more than 5 million borrowers. Yet his flagship loan forgiveness plan — which promised broad relief — was struck down by the U.S. Supreme Court. His administration then rolled out the SAVE Plan, an income-driven repayment option that tied monthly payments to income.
That too has faced turbulence. A February court ruling blocked parts of Biden’s repayment plans, prompting the Education Department to briefly pull application forms offline. Though they were later restored, the uncertainty has left borrowers in limbo.
The department said it will begin emailing notices to borrowers in default in the next two weeks. Formal letters initiating the garnishment process are expected by summer.
Despite the pushback, Education Secretary McMahon defended the decision, saying, “Going forward, the Department of Education, in conjunction with the Department of Treasury, will shepherd the student loan programme 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.”
(With inputs from Agencies)
The Education Department said it will resume referrals to the Treasury Department’s offset programme. This system allows the government to recoup overdue debts by deducting money from federal payments, including income tax refunds and Social Security benefits. After a 30-day warning, wage garnishments will begin.
"American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies," said Education Secretary Linda McMahon in a statement. She said the restart will be managed jointly with the Treasury Department and framed it as a step towards “financial health” for borrowers and the nation.
Pandemic relief ends, but confusion remains
Student loan collections were halted in March 2020 under President Donald Trump as a temporary relief during COVID-19. The pause was extended multiple times by President Joe Biden and formally ended in October 2024. Since then, repayment obligations have gradually returned, but clarity has not.
About 5.3 million borrowers are already in default, while another 4 million are between 91 and 180 days late. Only 40% of federal borrowers are up to date on their payments, according to department officials.
For many, navigating the system has become more difficult. Kristin McGuire, executive director of Young Invincibles, a youth advocacy group, pointed to layoffs at the Federal Student Aid office: “Things are really difficult to understand right now. Things are changing every day,” she said. “We can’t assume that people are in default because they don’t want to pay their loans. People are in default because they can’t pay their loans and because they don’t know how to pay their loans.”
Backlash from borrower advocates
The announcement has been criticised by groups representing borrowers, who say the sudden shift in enforcement is unfair and poorly timed.
“This is cruel, unnecessary and will further fan the flames of economic chaos for working families across this country,” said Mike Pierce, executive director of the Student Borrower Protection Center.
The organisation also cited the broader financial climate — from inflation to recent federal job losses — as a reason to reconsider. “The announcement also comes as Americans are navigating unprecedented economic uncertainty,” the centre said in a statement.
One-time shot at recovery: the rehabilitation path
Borrowers who want to avoid wage garnishment can enter into loan rehabilitation. Betsy Mayotte, president of The Institute for Student Loan Advisors, said this route allows defaulted borrowers to get back on track by making nine consecutive on-time payments.
To enrol, a borrower must contact their loan servicer and provide documentation of their income and expenses. The programme is available only once.
Biden’s mixed legacy on student debt relief
President Biden cancelled over $183 billion in student loans, aiding more than 5 million borrowers. Yet his flagship loan forgiveness plan — which promised broad relief — was struck down by the U.S. Supreme Court. His administration then rolled out the SAVE Plan, an income-driven repayment option that tied monthly payments to income.
That too has faced turbulence. A February court ruling blocked parts of Biden’s repayment plans, prompting the Education Department to briefly pull application forms offline. Though they were later restored, the uncertainty has left borrowers in limbo.
The department said it will begin emailing notices to borrowers in default in the next two weeks. Formal letters initiating the garnishment process are expected by summer.
Despite the pushback, Education Secretary McMahon defended the decision, saying, “Going forward, the Department of Education, in conjunction with the Department of Treasury, will shepherd the student loan programme 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.”
(With inputs from Agencies)
You may also like
'Pandemic-era freeze revoked': Why will millions in US face wage garnishment after May 5?
J-K : Restoration efforts begin in Ramban after cloudburst, flash floods damage property; no casualties reported
'With lively hope in eternal life': Pope Francis wanted a humble tomb at Rome's St Mary Major Basilica, reveals his will
Delhi LG makes changes to duty hours of officials after decrease in pollution levels
"Children should develop scientific curiosity and talent," says CM Mohan Yadav at Vigyan Manthan Yatra
