Millions of student loan borrowers in default will start receiving collections notices starting Monday. The Department of Education says the move is meant to protect taxpayers from footing the bill for unpaid loans.
“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” Education Secretary Linda McMahon said. She blamed the Biden administration for misleading borrowers into thinking debt could be wiped away. “The executive branch does not have the constitutional authority to wipe debt away,” she said.
Collections had been paused since March 2020 due to the pandemic. But the Department’s Office of Federal Student Aid (FSA) will now resume collection efforts beginning May 5. Notices will be sent to defaulted borrowers urging them to contact the Default Resolution Group.
The government estimates more than 42 million people owe over $1.6 trillion in student debt. Of those, 5 million haven’t made a payment in over 360 days. Nearly 4 million more are in late-stage delinquency. If trends continue, almost 10 million borrowers could be in default soon.
Borrowers in default will be urged to enter income-driven repayment plans or loan rehabilitation. Later this summer, FSA will begin wage garnishment for those who don’t respond. “All borrowers in default will receive email communications,” the agency said.
The pause in payments technically ended in 2023, but the Biden administration extended relief measures through the 2024 election. Critics say it left borrowers confused and encouraged delinquency. The Department accused the prior administration of pushing “illegal loan forgiveness schemes.”
Congress ordered repayments to resume in October 2023. But the Department says Biden officials stalled collection efforts to avoid political fallout. “The previous Administration failed to process applications... and continued to push misguided ‘on-ramps,’” the Department said.
For those who remain in default, the consequences could be severe. Penalties include garnishing wages, seizing tax refunds, and even withholding Social Security checks. The Wall Street Journal first reported the scale of the new collection effort.