Washington, D.C. – April 22, 2025
Student Loan Collections – after a five-year hiatus prompted by the COVID-19 pandemic, the U.S. Department of Education has announced it will resume collections on defaulted federal student loans starting May 5, 2025. The move is expected to affect over 5 million borrowers currently in default, with millions more at risk of falling behind on payments.
The collections will include aggressive recovery actions such as wage garnishments, seizure of tax refunds, and withholding of Social Security benefits, all facilitated through the federal Treasury Offset Program.
Student Loan Collections : Warnings and Outreach Planned
In an effort to reduce financial harm, the Department says it will launch a broad communications campaign to alert borrowers. Officials plan to inform borrowers about options such as income-driven repayment (IDR) plans, loan rehabilitation, and fresh start initiatives.
“We want to ensure borrowers know that help is available,” a senior Department spokesperson said. “Our goal is not to punish, but to bring borrowers back into good standing with support and flexibility.”
Oversight Shift Raises Concerns
Meanwhile, an internal memo from the Consumer Financial Protection Bureau (CFPB) revealed that student loan oversight may no longer be a top priority for the agency. The memo encourages states to take a more active role in monitoring and supporting student loan enforcement.
This development has raised concerns among consumer advocates who fear that reduced federal oversight may lead to inconsistent protections for borrowers across different states.
Potential Consequences
Borrowers who remain in default risk severe penalties, including damage to credit scores, legal action, and ongoing wage garnishments. Financial experts are urging individuals in default to act quickly.
“Don’t wait for a collection notice,” said a financial aid advisor. “Contact the Department of Education’s Default Resolution Group now. You may be eligible for plans that lower your payments or even get you out of default.”
Major Policy Shifts Ahead?
The announcement comes amid reports of internal restructuring at the Department of Education. Some proposals suggest transferring management of the federal student loan portfolio to other agencies—a move that could reshape how student debt is handled in the long term.
As the May 5 deadline approaches, advocacy groups are pushing for further reforms, including permanent relief measures and stronger borrower protections.
What Borrowers Should Do Now
- Visit studentaid.gov for current information.
- Call the Default Resolution Group to explore repayment options.
- Consider enrolling in income-driven repayment plans or pursuing loan rehabilitation.
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