After more than four years of relief, the US federal government will restart student loan collections on May 5, ending a long pause that protected borrowers in loan default from serious financial consequences like wage garnishment and tax refund seizure. This major shift will directly impact over 5 million borrowers.
Loan Collections Were Paused During the Pandemic
Since March 2020, collections on defaulted federal student loans were put on hold to support Americans during the Covid-19 pandemic. This freeze protected those who had missed payments for 270 days or more from losing their wages, tax refunds, or Social Security benefits.
However, Linda McMahon, Secretary of the US Department of Education, announced on April 21 that these protections will now end, as part of a full return to pre-pandemic loan policies.
What This Means for Borrowers in Default
If you’re in default, meaning you haven’t paid your student loan in over 270 days, you could soon face:
- Wage garnishment (money taken directly from your salary)
- Tax refund seizure
- Cuts to Social Security benefits
The Education Department says that all defaulted borrowers will get email notices in the next two weeks. These will explain your available options:
- Resume payments
- Apply for income-driven repayment plans
- Choose loan rehabilitation or consolidation
Taking quick action can help you avoid harsh penalties.
Why the Government Is Resuming Collections
Linda McMahon said in her statement:
“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies.”
She also accused the previous Biden administration of giving false hope to borrowers about long-term relief.
This step comes months after monthly student loan payments resumed in fall 2023. While regular payments had restarted, collections for those in default were delayed until now.
Strong Reactions from Borrower Advocates
Not everyone agrees with the policy shift. Mike Pierce, director of the Student Borrower Protection Center, criticised the timing, saying:
“This is cruel, unnecessary and will further fan the flames of economic chaos for working families.”
He also accused Donald Trump and Linda McMahon of blocking affordable options like the SAVE Plan, which was meant to offer income-based repayment support.
Where Do Other Borrowers Stand Now?
According to the Education Department:
- Only 38% of borrowers are currently paying their loans on time
- Over 40 million Americans still owe federal student loan debt
- About 2 million borrowers are in interest-free forbearance while courts review the SAVE plan
This creates uncertainty for many Americans trying to plan their financial future.
The restart of involuntary student loan collections on May 5 signals a major shift in US loan policy. With more than 5 million borrowers at risk, this change could put extra pressure on families already struggling with debt and rising costs. While email notices will explain repayment options, many believe the timing is unfair. With legal challenges ongoing and the 2024 presidential election approaching, the future of student loan relief in America remains uncertain—but for now, the collections are coming back, and borrowers in default must act fast.
