Federal Student Loan Collections Set to Resume in May Following Biden Administration’s Freeze
The initiative to restart loan repayments aims to stabilize the $1.6 trillion federal student debt portfolio while alleviating the burden on taxpayers in light of rising delinquency rates.
The Education Department confirmed on April 21 that federal student loan collections—such as wage garnishment—will recommence in a few weeks, concluding a five-year suspension and preparing millions of defaulted borrowers for renewed enforcement actions.
“American taxpayers will no longer be forced to act as collateral for irresponsible student loan policies,” declared Education Secretary Linda McMahon in a statement. “The Biden Administration has misled borrowers: the executive branch lacks the constitutional authority to erase debt, nor do loan balances simply vanish. Taxpayers have already absorbed hundreds of billions.”
McMahon was alluding to comprehensive debt cancellation efforts proposed by President Joe Biden, which sought to forgive student loans via executive action. These initiatives were ultimately blocked by the U.S. Supreme Court in 2023, which determined that such actions exceeded the president’s authority without congressional consent.
Advocates of Biden’s strategies argued that widespread forgiveness would alleviate financial pressure, diminish economic inequalities, and invigorate the economy. Conversely, critics labeled the proposals as illegal, fiscally irresponsible, and unjust to those who had already repaid their debts or who never borrowed in the first place.
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On Monday, the Education Department reported that around 5 million borrowers are already in default, while an additional 4 million are in late-stage delinquency—indicating they are between 91 and 180 days behind on payments. Officials warned that without intervention, nearly 10 million Americans could default by mid-year, which would account for close to 25 percent of the federal student loan portfolio. Currently, only 38 percent of borrowers are in repayment and up-to-date on their loans.
To initiate enforcement, Federal Student Aid (FSA)—the department’s loan servicing division—will restart the Treasury Offset Program on May 5. This program enables the federal government to collect overdue student debts by intercepting tax refunds, garnishing wages, and withholding Social Security benefits.
Administrative wage garnishment will commence later this summer, following the legally required notification period. The department will also empower guaranty agencies to resume involuntary collection activities on defaulted loans from the now-defunct Federal Family Education Loan Program.
“Moving forward, the Department of Education, alongside the Department of Treasury, will manage the student loan program responsibly and in accordance with the law, which means assisting borrowers in returning to repayment—for their own financial well-being and the economic outlook of our nation,” McMahon stated.
The resumption of collections coincides with a significant transformation within the Education Department.
Despite the staff reductions, McMahon asserted that the department remains dedicated to aiding overwhelmed borrowers. FSA will soon kick off a nationwide outreach initiative—including emails, social media engagement, and extended call center hours—to inform borrowers of their options. Several IDR plans, such as Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Income-Contingent Repayment (ICR), are set to be reopened.
The Education Department has stated that there will be no further attempts at blanket student debt forgiveness.
“Federal student loans are funded by the American public,” the department noted in its Monday release. “Instead of safeguarding responsible taxpayers, the Biden-Harris Administration placed them at risk for reckless lending, driving the federal student loan portfolio towards a financial crisis.”
The original suspension of student loan payments and interest accrual was initiated by Trump in March 2020 to temporarily alleviate the financial strain on Americans during the COVID-19 pandemic. Although the payment pause officially ended in September 2023, the Biden administration launched a one-year “on-ramp” period that protected delinquent borrowers from default, collections, and negative credit reporting—while interest continued to accrue.
By the end of this transition phase, the New York Fed estimated that the volume of overdue student loans had hit a record-high of 15.6 percent, amounting to over $250 billion in delinquent debt held by 9.7 million borrowers.
Reuters contributed to this report.
