Federal student loan collections resume next month

Student debt relief activists held a rally outside the U.S. Supreme Court in Washington, D.C. in June 2023. The federal government is set to restart collections on defaulted student loans for the first time in over five years, beginning next month. The U.S. Department of Education’s Office of Federal Student Aid announced on Monday that borrowers currently in default will need to start repaying their loans from May 5th. This decision marks the end of a pause on collecting defaulted loans that began in March 2020 due to the COVID-19 pandemic.

According to the Trump administration, there are 42.7 million borrowers who collectively owe more than $1.6 trillion in student debt. Of these borrowers, over 5 million have not made a payment in more than a year. The Department of Education noted that only 38% of borrowers are up to date with their payments, while the rest are either behind on payments, in forbearance, or on deferment.

Education Secretary Linda McMahon stated that American taxpayers should not bear the burden of irresponsible student loan policies, emphasizing the need for borrowers to repay loans for their financial well-being and the country’s economic stability. McMahon criticized the Biden administration for suggesting that debt could be easily erased, pointing out that billions have already been transferred to taxpayers.

The Department of Education, in collaboration with the Department of Treasury, aims to manage the student loan program responsibly and legally. The Trump administration recently reopened online applications for the Income Driven Repayment plan, which bases loan repayments on borrowers’ income. Additionally, Congress ordered student and parent borrowers to resume loan repayments after the Biden administration failed to lift the collections pause and process repayment applications.

Before the repayment restart, defaulted borrowers will receive email notifications from FSA regarding resuming payments and rehabilitation options. The Student Borrower Protection Center criticized the government’s approach, labeling it a “collections machine” that unfairly targets borrowers in default. FSA plans to work with various institutions to emphasize the importance of repayment and dispel any notions of mass loan forgiveness.

In conclusion, the federal government’s decision to resume collections on defaulted student loans is aimed at ensuring borrowers fulfill their obligations while protecting taxpayers’ interests.