^{Education Department to restart collections on defaulted federal student loans}

Starting May 5, 2025, the U.S. Department of Education will resume involuntary debt collections on federal student loans that are in default, impacting over 5 million borrowers. This decision follows the expiration of pandemic-era forbearance policies and marks the return of aggressive collection tactics, including tax refund seizures, Social Security garnishments, and wage deductions.

What’s Happening and Why Now?

The announcement, made on April 21, states that the Department’s Office of Federal Student Aid (FSA) will activate the Treasury Offset Program — a powerful debt recovery tool that allows the federal government to intercept a borrower’s financial entitlements from federal agencies to recover unpaid student debt.

This move ends a four-year moratorium on such collections, first put into place in March 2020 during the COVID-19 pandemic. While federal student loan repayments officially resumed in September 2023, borrowers in default were granted an additional year of protection under the Fresh Start Initiative — a temporary program designed to help them re-enter good standing.

How Many Are Affected?

• 5.1 million borrowers are currently in default, according to the Department.
• An additional 4 million borrowers are 90+ days past due, considered to be in late-stage delinquency.
• The total amount of federal student loans in default exceeds $125 billion, according to data from the Government Accountability Office.

What Is the Treasury Offset Program?

Under the Treasury Offset Program, the government can withhold or reduce:

• Federal tax refunds
• Social Security checks
• Federal salaries
• Other federal payments

These withheld funds are redirected toward repayment of defaulted student loans.

For example, a borrower expecting a $2,000 tax refund could see their entire refund seized to cover overdue loans. Likewise, Social Security recipients could lose a portion of their monthly benefits, a practice that particularly concerns consumer advocates as it impacts elderly and disabled borrowers.

Voices from the Administration

In a firm statement, U.S. Secretary of Education Linda McMahon criticized prior relief efforts, saying:

“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies. The executive branch cannot cancel debt unilaterally — and the bills don’t simply vanish.”

Her comments reflect ongoing political and legal debates surrounding student debt forgiveness, a hot-button issue since the Biden administration’s broader loan cancellation plan was blocked by the Supreme Court in 2023.

What Borrowers Need to Know Now

The Department will notify affected borrowers via email within the next two weeks, advising them of their status and options. Borrowers are urged to take immediate action by:

• Contacting the Default Resolution Group
• Enrolling in an Income-Driven Repayment (IDR) plan
• Applying for loan rehabilitation
• Exploring Fresh Start benefits before the May 5 deadline

Failing to act could result in administrative wage garnishment, where employers are directed to deduct money directly from paychecks without a court order.

Expert Insight

Higher education analyst Mark Kantrowitz highlighted a key concern:

“Borrowers who graduated during the pandemic may have never made a loan payment and might be unaware of the collection process. It’s critical that they understand their rights — and their responsibilities.”

He added:

“Even if you’re dissatisfied with your college experience or the quality of education you received, you are still legally required to repay your loans.”

What You Can Do Today

If you are in default or unsure of your loan status:

• Visit Studentaid.gov to check your loan information.
• Call the Default Resolution Group at 1-800-621-3115.
• Learn more about Fresh Start options before they expire.

The Bigger Picture

While the resumption of collections will restore billions to the federal balance sheet, it also raises concerns about financial hardship for vulnerable borrowers — especially those already living paycheck to paycheck. With more than 43 million Americans carrying federal student debt, how the government balances recovery and compassion remains a national issue with no easy solution.

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