Education Department to Resume Collecting Student Loans in Default

President Trump’s education boss Linda McMahon has defended the administration’s decision to resume student loan debt collections — insisting that greedy colleges have “profited massively” from Biden-era forgiveness measures.

The Department of Education announced on Monday that it will restart collecting federal student loans in default on May 5, ending a pandemic-era pause that began roughly five years ago.

More than 5 million borrowers are in default, the department said in a news release. Federal student loans go into default after 270 days without payment.

“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” Education Secretary Linda McMahon said in a statement. “The Biden Administration misled borrowers: the executive branch does not have the constitutional authority to wipe debt away, nor do the loan balances simply disappear.”

As part of the move, the Education Department’s Office of Student Aid will restart the Treasury Offset Program, which collects debts by garnishing federal and state payments, such as tax returns or social security benefits.

The department’s Monday announcement urged defaulted borrowers to contact the student aid office’s Default Resolution Group and “make a monthly payment, enroll in an income-driven repayment plan, or sign up for loan rehabilitation.”

The office will move to begin the process of administrative wage garnishment this summer. That process allows a federal agency to order a non-federal employer to withhold a percentage of an employee’s income to pay a delinquent debt, according to the Bureau of the Fiscal Service.

The move comes as the Trump administration works to dismantle the Education Department. President Donald Trump signed an executive order last month directing McMahon to start the process of shutting down the department. Trump later said that the Small Business Administration will absorb the Education Department’s massive student loan portfolio. The loan portfolio totals a staggering $1.8 trillion in debt, CNN has previously reported.

The end of the multi-year pause also arrives as borrowers face limited access to affordable payment programs. In an effort to comply with a recent court order to end the Biden admin?istration’s SAVE (Saving on a Valuable Education) plan, the Education Department has removed applications for all income-driven repayment plans from its website, effectively locking out borrowers from adjusting their plans if they’re unable to pay the standard rate.

The Education Department also said Monday it will share information next week about a new “enhanced” income-driven repayment process that it says will remove “the need for borrowers to recertify their income every year.”

The SAVE plan, introduced in 2023 and mired in legal challenges, allowed borrowers to cap their monthly student loan bills at 5% of their income instead of 10%. Borrowers were also promised student loan forgiveness after making as little as 10 years of payments.

The Student Borrower Protection Center, an advocacy organization, called out the Trump administration lifting the pause on involuntary collections for defaulters in the absence of income-driven repayment plans.

“For five million people in default, federal law gives borrowers a way out of default and the right to make loan payments they can afford,” Executive Director Mike Pierce said in a Monday news release. “Since February, Donald Trump and Linda McMahon have blocked these borrowers’ path out of default and are now feeding them into the maw of the government debt collection machine.”

via: CNN

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