After more than five years of a pause that began in March 2020 during the height of the COVID-19 pandemic, the U.S. Department of Education has announced a return to student loan collection activities. Beginning May 5, 2025, millions of borrowers who have defaulted on their federal student loans will once again face involuntary collection efforts, including wage garnishment and tax refund seizures.
For many, this signals a dramatic shift from the relief-focused policies of the last half-decade. It also reignites a debate about student debt, personal responsibility, economic recovery, and the federal government’s role in providing higher education assistance.
This article breaks down the policy change, what it means for borrowers, and how the conversation around student loans is evolving in the U.S.
The End of an Era: What Triggered the Return to Collections?
The suspension of federal student loan payments, interest accrual, and collections began under the Trump administration in 2020 as part of emergency pandemic relief. The Biden administration extended this pause multiple times, attempting to provide additional forgiveness and flexible repayment options. However, many of those efforts—particularly blanket loan forgiveness—were blocked by courts, and the final repayment grace period ended in October 2024.
Now, under the new Education Secretary Linda McMahon, the Department of Education is signaling a return to what some call “accountability,” while others call it “financial cruelty.”
“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” McMahon stated in a press release.
The new policy includes aggressive measures for borrowers in default, notably:
- Wage garnishment (after a 30-day notice).
- Tax refund and federal benefit seizure through the Treasury Offset Program.
- Reporting to credit agencies, further impacting borrowers’ financial stability.
Who Is Affected? The Numbers Behind the Decision
According to Department of Education data:
- Around 5.3 million borrowers are currently in default.
- Another 4 million are delinquent (91 to 180 days late).
- Fewer than 40% of federal student loan borrowers are current on their payments.
These numbers represent a substantial portion of the U.S. workforce—primarily working-class and middle-income Americans who pursued higher education with the hope of upward mobility. Instead, many now find themselves drowning in debt without the earnings to support repayment.
A Harsh Return for Many: Why Borrowers Are Struggling
Advocacy groups and borrower protection organizations have voiced strong criticism of the decision.
Mike Pierce, Executive Director of the Student Borrower Protection Center, labeled the move “cruel” and “unnecessary.”
He argues that this sudden shift could worsen financial hardship for working families already grappling with inflation, housing shortages, and healthcare costs. “This will further fan the flames of economic chaos,” he said.
Kristin McGuire, Executive Director of Young Invincibles, added that millions of borrowers are not willfully ignoring their obligations. Many simply don’t know how to repay—or are navigating a confusing and constantly shifting repayment system.
“Things are changing every day,” McGuire said. “People aren’t in default because they don’t care. They’re in default because the system is broken, and they don’t know what to do.”
Policy Whiplash: From Forgiveness to Enforcement
One of the biggest issues for borrowers has been the dramatic policy shifts from one administration to another. Under President Biden, multiple efforts were made to forgive broad categories of student debt. These efforts included:
- Targeted forgiveness for public servants.
- Expansions of income-driven repayment plans.
- The “SAVE” Plan, aimed at easing monthly payments.
However, court rulings—along with political opposition—halted many of these initiatives. When the SAVE plan was suspended in early 2025, applications for income-driven repayment (IDR) plans were temporarily removed from the Department’s website, leading to widespread confusion.
Although these applications have since been reinstated, the disruption sowed chaos for borrowers trying to stay on track. Millions who were placed in administrative forbearance saw interest continue to accrue, even if no payments were required.
This inconsistent policy landscape has left many unsure of their standing, increasing the likelihood of accidental default.
The Bigger Picture: Is This Really About Accountability?
While the Department of Education insists that resuming collections is about restoring fiscal discipline and protecting taxpayers, critics argue the real issue is systemic. The American higher education model places enormous financial risk on individual students—often teenagers—who take on tens of thousands of dollars in debt without guaranteed job outcomes.
Unlike most developed nations, the U.S. does not provide free or significantly subsidized university education. As a result, student loans have ballooned into a $1.7 trillion crisis.
Advocates ask: Why should borrowers shoulder the blame for an economic and educational system that encouraged borrowing but failed to deliver adequate safety nets?
What Can Borrowers Do Now?
If you’re a borrower concerned about default or already in default, here are key steps to take:
- Check Your Loan Status: Use studentaid.gov to find out your current status, servicer, and balance.
- Apply for Income-Driven Repayment: These plans cap your monthly payment based on your income and family size. Even if you defaulted, you might be eligible to rehabilitate your loan through these programs.
- Explore Rehabilitation Options: Borrowers can remove their loan from default by making nine consecutive on-time payments under a rehabilitation agreement.
- Seek Forgiveness Paths: If you work in public service or a nonprofit, you might be eligible for Public Service Loan Forgiveness (PSLF). Even if you’re not eligible now, enrolling in the right repayment plan could make you eligible later.
- Avoid Scams: Only use official Department of Education resources or trusted non-profit organizations. Scammers often prey on borrowers in default.
The Future of Student Debt in America
Resuming loan collections may be legal, but it is deeply unpopular. Polls consistently show that the majority of Americans support at least some form of debt relief or restructuring.
Several presidential candidates for the 2028 election have already made student loan reform central to their platforms. Some propose making community college free, others advocate for a complete overhaul of the student loan system.
In the meantime, organizations such as the NAACP, Young Invincibles, and the SBPC continue to pressure the federal government to halt punitive collection measures and instead offer solutions that promote long-term economic recovery.
Conclusion: Navigating a Complex Landscape
The resumption of federal student loan collections in 2025 is more than just a policy update—it’s a wake-up call for millions of Americans who had hoped for permanent relief. It’s also a reminder that education, debt, and opportunity are deeply intertwined in the U.S. economic system.
Borrowers must now navigate not only financial stress but also a political and legal system that can shift direction with every election.
While the Department of Education insists this move restores accountability, critics warn it could deepen inequality and undermine the financial future of a generation. What’s clear is that the student debt crisis is far from over—and how America addresses it will shape its economic destiny for decades to come.
