Return of Defaulted Loan Collections The federal government will resume collecting on defaulted student loans in 2025. After years of pandemic pauses, late payers may face wage garnishment and tax refund seizures as collection activities resume.
Many Defaults at Risk Now Over 5.6 million borrowers default. These individuals risk sudden financial hardship if collections resume, especially if they're unaware that old debts can still be collected despite Department of Education restructuring or downsizing.
No Official Restart Date—But Don't Wait No date has been set for collections to resume, but the Biden administration has said 2025. Don't expect an unlimited grace period. Contacting your servicer, exploring payment plans, and consolidating loans now is crucial.
Leniency Could Be Brief Fresh Start gave defaulted borrowers a penalty-free chance to catch up. With the incoming administration possibly changing course, similar opportunities may not exist. Time may be running out to fix your default status before stricter policies return.
Future of Income-Driven Repayment Plans Uncertain The Biden administration offered generous IDR options like the SAVE plan, which automatically lowered monthly payments based on income.
Structural Overhaul Confusing Reducing or eliminating the Department of Education could confuse borrowers. Outsourcing to other agencies or contractors may increase red tape. Avoid misinformation as roles and rules change by visiting government websites, reputable nonprofits, and consumer protection groups.
Aggressive Collections May Continue Whatever structural changes occur, the government can still hire private collection agencies. These collectors have been accused of sloppy or abusive practices, including misinformation.
The Inaccessible Stay Vulnerable Low-income borrowers with poor financial literacy and contact information often default. This group may be harder to reach and help without a strong, centralized Department of Education to regulate and communicate.
Social Security and Other Federal Benefits Are Government Run Defaulting means the government can garnish federal benefits like Social Security retirement and disability payments. If you have at least $750, it can take 15% of your monthly benefit.
Early Action and Outreach Matter Consumer, legal aid, and advocacy groups are preparing to help borrowers before collections resume. Don't wait for a letter—act now. Know repayment plans, research consolidation or rehabilitation, and get nonprofit counseling to avoid a rude awakening.