Student Loan Collections Return After Pandemic Pause

Starting May 5, the Department of Education will resume involuntary debt collection efforts by activating the Treasury Department’s offset program. This initiative allows the government to seize certain federal payments such as tax refunds, federal employee wages, and other benefits from individuals who have fallen behind on their federal debts. Additionally, after issuing a 30-day advance notice, the department will begin garnishing the wages of borrowers who default on their student loans.

The Trump administration's recent declaration signals the conclusion of a more lenient approach that had been in place since the onset of the COVID-19 pandemic. Since March 2020, no federal student loans including those in default have been sent to collections. Meanwhile, under President Joe Biden, the Department of Education made several attempts to implement widespread student loan forgiveness, but those efforts were repeatedly blocked by judicial rulings.

Effective May 5, the Education Department will restart aggressive recovery efforts on defaulted student loans by leveraging the Treasury’s offset system, a program that enables the government to intercept federal disbursements such as tax returns, Social Security payments, and federal employee earnings to recoup unpaid debts. In tandem with these measures, borrowers in default will face wage garnishment following a 30-day advance warning, marking a significant shift back to stringent enforcement after years of pandemic-era relief.