US student loan collections to resume after pandemic pause
Millions of borrowers face renewed wage garnishment, tax refund seizures as debt collection restarts, NBC reports
The US federal government will restart collections on defaulted student loans beginning Monday, ending a pause that began in March 2020 during the COVID-19 pandemic, according to local media reports.
According to NBC News, the Trump administration will use the Treasury Department's Offset Program to reclaim unpaid debts, including through wage garnishment, tax refund seizures and reductions in Social Security benefits.
Education Secretary Linda McMahon said in an April 21 statement that the decision aimed to protect taxpayers.
“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” NBC quoted her as saying.
Of the nearly 43 million Americans holding student loans, only about one-third have made regular payments, according to federal data cited by NBC.
The national student loan debt now totals $1.6 trillion.
Borrowers in default were sent emails from the Office of Federal Student Aid urging them to contact the Default Resolution Group.
Options include income-based repayment plans or loan rehabilitation, which allows for default status to be removed after several on-time payments.
Sabrina Calazans, executive director of the Student Debt Crisis Center, warned that the decision could create a “financial catastrophe.”
“The plans and proposals being put forth by the Trump administration are going to harm millions of individuals and families,” she added.
Before leaving office, former President Joe Biden had canceled debt for over 5 million borrowers, including public service workers and those misled by for-profit colleges, NBC reported.
His broader forgiveness plan, aiming to cancel up to $20,000 per borrower, was blocked by the Supreme Court in 2023.
“There will not be any mass loan forgiveness,” the Education Department said in its April news release.
In a Wall Street Journal op-ed, McMahon said that “debt doesn't go away; it gets transferred to others.”
The Education Department is expected to begin sending wage garnishment notices later this summer, NBC added.
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