Student loan collections May 5: Millions of federal borrowers in default will face renewed debt collection starting May 5, 2025. The U.S. Department of Education, under Education Secretary Linda McMahon, announced it will resume garnishing wages and withholding government benefits from borrowers who have not made payments in over nine months.
End of Pandemic-Era Relief
The government paused student loan debt collections in March 2020 due to COVID-19 emergency measures. The Biden administration extended that freeze multiple times, but President Donald Trump will now lift it. The final grace period for loan repayments ended in October 2024.
What Borrowers Can Expect
Beginning next month, student loan collections May 5 will include referrals to the Treasury Department’s offset program. That means tax refunds, federal salaries, and Social Security benefits could be withheld to recover defaulted amounts. After a 30-day notice, garnishing wages will also begin.
Currently, 5.3 million borrowers are in default. An additional 4 million are behind on payments by 91 to 180 days. Less than 40% of all borrowers are up to date.
Criticism from Advocates
“This is cruel, unnecessary and will further fan the flames of economic chaos,” said Mike Pierce, head of the Student Borrower Protection Center.
Advocates argue that the abrupt policy shift and layoffs at the Federal Student Aid office have left borrowers confused and unsupported.
Options for Borrowers in Default
Experts recommend entering loan rehabilitation to avoid wage garnishment. Borrowers must request enrollment from their loan servicer, provide proof of income, and make nine on-time payments to exit default. Rehabilitation can only be used once.
Ongoing Confusion and Program Disruptions
Court rulings have blocked some income-driven repayment plans, leaving many in limbo. The Biden-era SAVE Plan was paused, and applications were only recently brought back online.
“People are in default because they can’t pay their loans and because they don’t know how,” said Kristin McGuire, director of Young Invincibles.
A Stark Policy Reversal
Biden oversaw more than $183 billion in student loan forgiveness for over 5 million borrowers. McMahon, however, criticized that approach: “American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies.”
Source: AP News
