After a three-year pause, the U.S. Department of Education has announced that collections on defaulted federal student loans will resume on May 5, 2025. This marks a significant shift in policy, as borrowers who have fallen behind on payments will once again face wage garnishment, tax refund interceptions, and reductions in Social Security benefits.

Since March 2020, federal student loan borrowers in default were shielded from aggressive collection tactics due to pandemic relief measures. However, with the expiration of temporary protections, the government is reinstating the Treasury Offset Program, which allows it to seize tax refunds and reduce Social Security benefits for those with unpaid student debt. Additionally, wage garnishment will resume later this summer, meaning up to 15% of a defaulted borrower’s disposable income could be deducted directly from their paycheck.

More than 5 million borrowers are currently in default, and another 4 million are in late-stage delinquency, meaning they could soon enter default status. Borrowers who have missed payments for 270 days or more are considered in default and will be subject to collection efforts, including garnishment and litigation.

The Department of Education is urging affected borrowers to take action before collections begin. Borrowers will receive email notifications from the Federal Student Aid office, advising them to enroll in an income-driven repayment plan, make a monthly payment, or sign up for loan rehabilitation to avoid garnishment.

For those struggling with repayment, loan rehabilitation offers a way out of default by making nine consecutive, on-time monthly payments based on income. Additionally, borrowers can check their loan status through their Federal Student Aid account or by contacting their loan servicer.

Education Secretary Linda McMahon defended the decision, stating that resuming collections ensures that taxpayers are not burdened with unpaid student loans. She emphasized that broad student loan forgiveness is not on the table, and the administration aims to restore “commonsense and fairness” by holding borrowers accountable for repayment.

With collections set to resume, borrowers must act quickly to avoid financial consequences. Wage garnishment notices will be sent out later this summer, and those in default could see their IRS tax refunds intercepted or Social Security benefits reduced.

Student loan policies in the United States have undergone significant changes over the decades, shaped by economic conditions, political priorities, and the growing cost of higher education. Here’s a brief overview of key milestones in student loan policy evolution:

Early Foundations (1940s-1960s)

• 1944 – The GI Bill: Provided financial assistance to returning World War II veterans, covering tuition and living expenses.
• 1958 – National Defense Education Act: Established federal student loans to encourage studies in science and technology amid Cold War concerns.
• 1965 – Higher Education Act: Created the Guaranteed Student Loan Program, later known as Stafford Loans, expanding access to federal loans for middle-income students.

Expansion and Reform (1970s-1990s)

• 1972 – Pell Grants Introduced: Provided need-based grants to low-income students, reducing reliance on loans.
• 1993 – Student Loan Reform Act: Introduced income-contingent repayment, allowing borrowers to pay based on their earnings.
• 1998 – Bankruptcy Restrictions: Made it significantly harder to discharge student loans through bankruptcy.

Modern Adjustments (2000s-Present)

• 2007 – College Cost Reduction and Access Act: Established income-based repayment (IBR) and Public Service Loan Forgiveness (PSLF).
• 2010 – Direct Loan Program: Eliminated private lenders from federal student loans, making the government the sole lender.
• 2020 – COVID-19 Relief Measures: Suspended federal student loan payments and interest accrual for nearly three years.
• 2023 – Loan Forgiveness Efforts: The Biden administration attempted broad loan forgiveness, but legal challenges limited its scope.

Today, student loan policies continue to evolve, with ongoing discussions about debt relief, repayment flexibility, and the rising cost of education.