Education Department Begins Debt Collection for 5.3 Million Defaulted Student Loans

The Education Department will resume collection efforts next month on federal student loans that are in default, affecting approximately 5.3 million borrowers. This move ends a period of leniency that began during the COVID-19 pandemic, when no federal student loans were referred for collection. Starting May 5, the department will use the Treasury Department’s offset program to withhold tax refunds, federal salaries, and other government payments from those with overdue debts, and will begin garnishing wages after a 30-day notice. The payment pause and interest relief, initiated in 2020 and extended through 2023, ended with a final grace period in October 2024, requiring millions to restart payments. Borrowers who miss payments for nine months enter default, which can negatively impact credit scores and trigger collections. In addition to those in default, about 4 million more borrowers are significantly behind on payments, and fewer than 40% of all borrowers are currently up to date.