Student Loan Collections Resume Amid Defaults

a { color: #880000 !important; background: #ffeeee !important; } Latest News from NourishThe Nourish Mission (formerly OneSub)Get answers to today's big questionsStudent Loan Collections Resume Amid DefaultsPersonal Finance > FinanceOn May 5, 2025, the U.S. Department of Education resumed collections on defaulted student loans, impacting approximately 5.3 million borrowers. This marks the end of a pause initiated in March 2020 due to the COVID-19 pandemic, with potential wage garnishments and withheld tax refunds for non-compliance. Education Secretary Linda McMahon emphasized the need for accountability in higher education financing.

What's happened

On May 5, 2025, the U.S. Department of Education resumed collections on defaulted student loans, impacting approximately 5.3 million borrowers. This marks the end of a pause initiated in March 2020 due to the COVID-19 pandemic, with potential wage garnishments and withheld tax refunds for non-compliance. Education Secretary Linda McMahon emphasized the need for accountability in higher education financing.

What's behind the headline?

Implications of Resuming Collections

Financial Burden: The resumption of collections will likely exacerbate financial difficulties for many borrowers, particularly those already struggling with high debt levels.
Impact on Credit Scores: Defaulting on loans can severely damage credit scores, making it harder for borrowers to secure future loans or housing.
Government Accountability: Education Secretary Linda McMahon's statements reflect a shift towards holding borrowers accountable, emphasizing that taxpayers should not bear the burden of unpaid loans.
Potential for Increased Defaults: With many borrowers already in default, the resumption of collections could lead to a further increase in defaults, creating a cycle of debt that is difficult to escape.
Need for Support Systems: As collections resume, there is a pressing need for robust support systems to help borrowers navigate repayment options and avoid default.

What the papers say

The New York Times reported that the Department of Education's decision to restart collections is a significant shift from the leniency shown during the pandemic, with Education Secretary McMahon stating, "American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies." In contrast, Business Insider highlighted the concerns of borrowers facing wage garnishment and the potential for economic hardship, noting that many are already struggling to make ends meet. The Independent emphasized the urgency of addressing the growing number of borrowers in default, which could reach 10 million in the coming months. This multifaceted coverage illustrates the tension between government policy and the realities faced by borrowers, underscoring the need for a balanced approach to student loan management.

How we got here

The pause on student loan collections began in March 2020 as a relief measure during the COVID-19 pandemic. This relief was extended multiple times, with payments resuming in October 2023. The recent resumption of collections is part of a broader effort to address the growing number of borrowers in default, which has reached approximately 5.3 million.

Go deeper

What options do borrowers have to avoid default?
How will this impact future student loan policies?
What support is available for struggling borrowers?

Common question

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