U.S. Education Department Revives Collections on Defaulted Student Loans

The U.S. Department of Education announced on Monday that it will resume collections on defaulted federal student loans starting May 5. This decision follows a five-year pause initiated during the early days of the COVID-19 pandemic.

Currently, over 5 million borrowers are in default on their loans, with only 38% reported as current on payments. U.S. Secretary of Education Linda McMahon emphasized the necessity of returning to collections, stating, “American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies.”

During a recent statement, McMahon criticized the Biden administration for creating unrealistic expectations regarding student debt forgiveness. She asserted, “The executive branch does not have the constitutional authority to wipe debt away.” This follows a broader political dialogue initiated during last year’s presidential campaign, where Biden’s handling of student debt was scrutinized.

The Department of Education outlined its plan to restart the Treasury Offset Program, managed by the U.S. Treasury, on the designated date. Borrowers in default will receive notifications over the next two weeks, urging them to engage with the Default Resolution Group for repayment options.

Additionally, the department plans to send out required notices for administrative wage garnishment later this summer. In total, over 42.7 million borrowers are currently responsible for more than $1.6 trillion in student debt, indicating the scale of the issue at hand.

McMahon concluded with a statement regarding financial responsibility: “Going forward, the Department of Education, in conjunction with the Department of Treasury, will shepherd the student loan program responsibly and according to the law.”