WASHINGTON— The U.S. Department of Education announced that its Office of Federal Student Aid (FSA) will resume collections on defaulted federal student loans starting May 5, 2025, ending a pause in place since March 2020. The initiative aims to protect taxpayers from bearing the cost of unpaid loans while providing resources to help borrowers return to repayment.
The move follows a prolonged pause under the Biden-Harris Administration, which continued despite Congress mandating repayment to begin in October 2023. The Department will support the resumption with a comprehensive outreach campaign, including tools like the Loan Simulator and an AI Assistant named Aiden, to guide borrowers out of default.
“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” said U.S. Secretary of Education Linda McMahon. “The Biden Administration misled borrowers: the executive branch does not have the constitutional authority to wipe debt away, nor do the loan balances simply disappear. Hundreds of billions have already been transferred to taxpayers.”
As of now, 42.7 million borrowers owe over $1.6 trillion in federal student debt, with more than 5 million in default for over 360 days and 4 million in late-stage delinquency. Only 38% of borrowers are actively repaying and current on their loans, while others are in forbearance, deferment, or grace periods. Nearly 1.9 million borrowers cannot enroll in repayment plans due to a processing pause started in August 2024. The Department plans to resume processing applications for income-driven repayment plans next month.
Involuntary Collections and Borrower Support
On May 5, the FSA will reinstate the Treasury Offset Program, managed by the U.S. Department of Treasury, to collect on defaulted loans. Over the next two weeks, borrowers in default will receive email notifications urging them to contact the Default Resolution Group to arrange payments, enroll in income-driven repayment, or pursue loan rehabilitation. Administrative wage garnishment notices will begin this summer.
The Department will also authorize guaranty agencies to resume involuntary collections on Federal Family Education Loan Program loans, as mandated by the Higher Education Act. All collection activities will comply with legal requirements, ensuring borrowers receive sufficient notice and opportunities to repay voluntarily.
To assist borrowers, the FSA will launch a two-month communication campaign using emails, social media, and extended servicer call times to highlight repayment options. An enhanced Income-Driven Repayment (IDR) process will streamline enrollment and eliminate annual income recertification. The Department will partner with states, colleges, and financial aid organizations to emphasize that borrowers, not taxpayers, are responsible for loan repayment.
Context of the Resumption
The collections pause began during the COVID-19 pandemic to alleviate financial strain on borrowers. However, the extended pause led to confusion and rising default rates, with nearly 25% of the federal loan portfolio at risk of default in the coming months. The Biden-Harris Administration’s attempts at loan forgiveness and “on-ramp” repayment options faced legal challenges, leaving many borrowers uncertain.
The resumption of collections signals a focus on fiscal responsibility, aiming to stabilize the federal student loan portfolio. Borrowers are encouraged to visit StudentAid.gov for resources to manage payments and avoid default.
