The Trump administration says it will resume collections on defaulted student loans for the first time in five years on May 5, raising questions and anxieties for millions of borrowers across the country.
That means The Department of Education's office of Federal Student Aid can start taking funds out of borrowers' tax refunds, Social Security benefits and — eventually — wages.
"Together, these actions will move the federal student loan portfolio back into repayment, which benefits borrowers and taxpayers alike," Education Secretary Linda McMahon said.
The change will affect 5.3 million borrowers who went into default before the pandemic, according to the Education Department. Technically, a borrower is considered in default when they fail to make a loan payment for at least 270 days.
Even more borrowers are delinquent on their payments and may be headed toward default. According to data provided to NPR by the department, 2.9 million borrowers are 61-90 days late on their loan payments. Another 4 million are in "late-stage delinquency," have been reported to the credit bureaus and are quickly approaching default, according to the Department.
"Most borrowers … they're not in danger of delinquency today, but in five months, they could be," says Scott Buchanan, executive director of nonprofit trade group Student Loan Servicing Alliance. "And so taking action today is pretty important."
In a press release on Monday, the Education Department said it will send notices of wage garnishment — seizing up to 15% of a borrower's disposable income — "later this summer." In the meantime, it is urging borrowers in default to start making monthly payments or enroll in an income-driven repayment plan.
"It's totally reasonable that people would be scared and confused and overwhelmed by the prospect of paying hundreds or thousands of dollars a month that they don't have," says Mike Pierce, executive director of the Student Borrower Protection Center.
Many families are already struggling to get by in today's turbulent economy, especially with tariffs making many goods more expensive. On top of that, he says, families with student debt could soon start seeing some of their paycheck or Social Security disappear.
NPR spoke to experts about borrowers' options and the consequences they could face as collections resume. Here's what to know.
Why are collections restarting?
Nearly 8 million federal student loan borrowers were in default when the pandemic — and accompanying economic downturn — started. The first Trump administration announced in March 2020 that it would pause collections on defaulted student loans for at least 60 days.
"By the middle of 2020, no one is having their credit damaged. No one is having their paychecks seized. No one is having their public benefits ceased," Pierce adds. "And that's where things have been now for about five years."
The Biden administration — which tried with mixed success to forgive federal student loan debt — repeatedly extended the pause on federal student loan payments until October 2023. But even once payments resumed, collections did not — until now.
Betsy Mayotte, president of the Institute of Student Loan Advisors (TISLA), says the return of loan collection was inevitable and that the Trump administration isn't creating new policy — just restoring old policy.
"They were always going to start collecting these defaulted loans again — it was just a matter of when the switch was going to get flipped," she says. "The Department of Education has a requirement to collect on these debts; they're owed to the U.S. taxpayer."
Mayotte says her nonprofit is now hearing from many panicked borrowers who have been lulled into a false sense of security — they mistakenly thought their loans had been forgiven, or that a statute of limitations had expired.
"Now, [a] statute of limitations does apply to other consumer debts," she said. "But there is no statute of limitations for federal student loans."
The Trump administration, which is vocally opposed to broad-based student loan forgiveness, says it is taking this step to relieve the burden on American taxpayers.
"Student and parent borrowers — not taxpayers — must repay their student loans," the Department of Education said. "There will not be any mass loan forgiveness."
How can I tell if I'm impacted?
The Department of Education says it will reach out to all borrowers in default before May 5, through emails and social media posts, "reminding them of their obligations and providing resources and support to assist them in selecting the best repayment plan."
People can also check their status by logging into StudentAid.gov, the Department of Education's website.
The online dashboard shows how much debt they owe and to whom, their monthly payment amount and — if they're in default — a warning message that says so. It's also where they can make sure their email and physical addresses are up to date.
Student loan servicers, like MOHELA and Aidvantage, can also provide clues.
"If you're getting bills from a student loan servicer, that means you're not in default, and you're not going to face forced collections over the summer," Pierce says.
Loan servicers will also send multiple notices — by email, snail mail or phone — to borrowers who are delinquent and increasingly at risk of going into default, Buchanan says.
"Don't ignore the notices, don't ignore the phone calls," he says. "We probably have a solution that can meet you where you are. It will certainly be better than going into delinquency and default."
What are my options if I'm in default?
There are three primary ways people can get out of default. The quickest, but hardest, is to repay the loans in full.
"If people could pay the loan in full, they probably wouldn't be in default," Mayotte says. "So that's not really an option for most borrowers in this situation."
The two other methods are loan consolidation and rehabilitation.
Loan consolidation is the faster of the two, says Mayotte. It involves paying off your defaulted loans with new repayment terms. While it does not remove the fact that you were once in default from your credit report, it does make you eligible for lower payment options.
For loan rehabilitation, a borrower must make multiple — typically nine — consecutive on-time payments of an amount that is usually based on their income. Once those are paid, the loan is taken out of default and the default line is removed from the person's credit report.
To make matters more complicated, some 8 million borrowers are still waiting to find out if their repayment plan is even legal. The Biden administration's plan known as SAVE, which bases a person's monthly student loan payments on how much money they make, is currently tied up in the courts.
"That's all happening at the same time as Secretary McMahon is trying to restart the debt collection machine," Pierce says. "So we're worried that borrowers are not going to have a full set of options that help them afford their payments and are going to have no choice but to sit still and watch their Social Security be seized, watch their wages get garnished."
What resources are available?
The announcement comes at a dizzying time for the Department of Education, which is being cut in half amidst the Trump administration's mass layoffs across the federal workforce. The Trump administration has said the student loan program will move to the Small Business Administration, which plans to cut its workforce by more than 40%.
All the disruption and downsizing will likely make it even harder for borrowers to navigate their loans.
"The layoffs affected a lot of what I call 'the helpers,' " Mayotte says. "And with everything else going on, the loan servicers are also really overwhelmed. So it's very common for there to be long hold times when borrowers reach out to their usual resources."
She says there are plenty of alternatives, like advocates and even ombudsmen in certain states, as well as information from nonprofits and other reliable sources online.
Buchanan encourages borrowers to use the loan calculator on the federal student aid website to get a rough estimate of what their monthly payment and interest choices would look like under different repayment plans, to choose the one that is best for them. Then, he says, they can go to their loan servicer's online portal and do the actual math.
He wants people to know there are ways to lower their monthly payments — like economic hardship deferments — especially if they just lost a job or are in extreme financial distress. Plus, he says, people can change repayment options as their circumstances change.
"I think the most important thing for people to realize … is that the federal student loan program is probably one of the most flexible programs that exists when you borrow money," he says. "So take advantage of it. It's part of the government program. It's part of the benefit."
NPR's Cory Turner contributed reporting.
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