Breaking: Trump Administration to Resume Aggressive Student Loan Collections on May 5 — Millions at Risk of Wage and Benefit Seizures
In a move that could impact over 5 million Americans, the Trump administration has announced that, starting May 5, 2025, it will resume collections on defaulted federal student loans. This includes reinstating the Treasury Offset Program, which allows the government to withhold federal benefits such as tax refunds, Social Security payments, and federal salaries to recover unpaid student loan debt .Business Insider
Later this summer, the administration plans to initiate wage garnishment, where up to 15% of a borrower’s disposable income could be deducted from their paychecks to repay their loans .
What’s Happening?
Collections Resume: After a pause since March 2020 due to the COVID-19 pandemic, the Department of Education will restart collections on defaulted student loans.
Treasury Offset Program: This program allows the government to seize federal payments, including tax refunds and Social Security benefits, to recover defaulted student loan debts.
Wage Garnishment: Starting later this summer, the government can deduct up to 15% of a borrower’s disposable income directly from their paychecks.
Who Is Affected?
Approximately 5.6 million borrowers are currently in default, with an additional 4 million in late-stage delinquency . Borrowers who have not made payments for over 270 days are considered in default and are subject to these collection efforts.politico.com
What Can Borrowers Do?
Loan Rehabilitation: Borrowers can enter a loan rehabilitation program, which requires making nine on-time payments over ten months to restore loans to good standing.politico.com
Income-Driven Repayment Plans: These plans adjust monthly payments based on income and family size, potentially lowering monthly obligations.Student Loan Planner+1Yahoo Finance+1
Contact Loan Servicers: Borrowers should reach out to their loan servicers or the Department of Education’s Default Resolution Group to explore available options.
Criticism and Concerns
Advocacy groups have criticized the move, expressing concern over the potential financial hardship for borrowers, especially seniors and individuals with disabilities who rely on Social Security benefits.The Student Borrower Protection Center described the resumption of collections as “cruel” and economically harmful .
