Are You at Risk? Things to Know About Student Loan Collections

The pause is over. As of May 5, millions of federal student loan borrowers are expected to pay — and the consequences for falling behind are steep. The Department of Education warns that those who fail to pay on time risk damage to their credit scores, wage garnishment, tax refund seizure, and even cuts to their Social Security benefits. For many, the return of student loan collections marks a painful reminder of a system looming quietly in the background since 2020.

 

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The Trump Administration Resumes Collections

The Trump administration has officially ordered federal agencies to resume collections on defaulted student loans. This ends a five-year break that began during the COVID-19 pandemic under the CARES Act. According to Federal Student Aid, the legislation temporarily paused payments, interest accrual, and collections on most federal student loans. But as of this spring, the protections are gone, and the system is in full swing.

TransUnion reported that more than 43 million Americans hold federal student loan debt. Nearly 21% of borrowers are now 90 days or more past due. That’s nearly double the pre-pandemic delinquency rate of 11.5% in February 2020, the highest ever recorded.

This decision affects those actively defaulting and those at risk of falling behind. Understanding the full scope of student loan collections right now could be the difference between protecting your paycheck and losing a chunk of it. Here are five things about student loans you need to know.

 

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1. Know your loan status

If you haven’t already, log in to your account at StudentAid.gov and check your status. Are your loans in good standing, delinquent, or in default? Knowing where you stand is the first step in protecting your finances. Borrowers in default are at immediate risk of collections and garnishment.

2. Enroll in an income-driven repayment plan

If you struggle to make payments, apply for an income-driven repayment (IDR) plan. These plans cap your monthly payment based on income and family size. The Trump administration stopped all IDR applications earlier this year, but the application is available. According to ELFI, all IDR applications will resume processing later this month.

3. Consider loan rehabilitation or consolidation

 

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If you’re already in default, you still have options. Loan rehabilitation allows you to make nine reasonable payments over 10 months to restore your loan to good standing. 

4. Beware of scams and misinformation

As collections resume, scam calls and shady “debt relief” offers are rising. Always verify information through the official StudentAid.gov website or your loan servicer. If someone asks for upfront fees or pressures you into a plan, walk away.

5. Prioritize your protection

Take action immediately if you risk wage garnishment or tax refund seizure. You can request a hearing to challenge the garnishment or apply for hardship deferment. Legal aid groups or nonprofit financial counselors can also guide you.

The reality is this: student loan collections are back. Luckily, there are more things to know about student loan collections, and knowing them could protect your future. With the highest delinquency rates ever recorded and federal collections in full force, borrowers must act fast, stay informed, and protect their earnings. If you’ve been ignoring the notices or are unsure where to turn, now’s the time to act.

What do you think about how the Trump Administration is handling student loans? Share your thoughts below!

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