APSACION PRESS by ANNIE MA
WASHINGTON (AP) — The education department will begin collecting next month on default student loans, including wage decorations for potentially millions of borrowers, officials said Monday.
Currently, around 5.3 million borrowers are defaulting on federal student loans.
The Trump administration’s announcement will end the period of generosity that began during the Covid-19 pandemic. Since March 2020, federal student loans, including default loans, have not been referred to collection. Under President Joe Biden, the education department has repeatedly attempted to give wide forgiveness for student loans, but was stopped by court.
“U.S. taxpayers are not forced to act as collateral for irresponsible student loan policies,” Education Secretary Linda McMahon said.
Starting May 5, the department will begin unwilling collection through the Ministry of Finance’s offset program. This withholds government payments, including tax refunds to the government, federal salaries and other benefits from people with past debt. After 30 days of notification, the department will also begin awarding wages for default borrowers.
The decision to send debt to the collection has attracted criticism from supporters who said the borrower had experienced whipping and confusion with the changing student loan policy between the Biden and Trump administrations.
“This is cruel and unnecessary and will incite a further flame of economic disruption for working families in this country,” said Mike Pierce, executive director of the Student Boroa Protection Centre.
Already, many borrowers support the obligations being mandated.
In 2020, President Donald Trump suspended federal student loan payments and interest accrual as a temporary relief measure for student borrowers. The payment suspension was extended multiple times by the Biden administration until 2023, and the final grace period for loan repayment ended in October 2024. That meant tens of millions of Americans had to start paying again.
Borrowers who do not make payments for nine months default. This is reported with a credit score and can be taken to the collection.
In addition to borrowers who have already defaulted, around 4 million people are 91-180 days behind on loan payments. Less than 40% of all borrowers, all of whom are up to date on student loans, department officials said.
Layoffs at the Federal Student Aid Agency for Education made it difficult for students to answer questions even if they wanted to pay the loan, said Kristin McGuire, executive director of Young Invincibles, a group focusing on economic security for young adults. And after a court ruling in February blocked Biden-era payment plans, questions are swirling around about certain income-driven repayment programs, leaving borrowers to a more generous savings plan. In February, the education department reduced applications for an income-driven repayment program that tied monthly payments to people’s income levels to get them back online in a month.
“It’s really hard to understand things right now. Things change every day,” McGuire said. “We can’t assume that people are in default because we don’t want to pay the loan. People are default because we can’t pay the loan and don’t know how to pay the loan.”
For default borrowers, one step to avoiding wage decorations is said Betsy Mayotto, president of the Student Loan Advisor Institute.
The borrower must ask the loan servicer to be placed in such a program. Typically, the servicer will ask for proof of income and expenses to calculate the amount of payment. Once borrowers are paid on time for the ninth month in a row, they will be taken out of the default, Mayott said. You can only do rehabilitation once for your loan.
Biden oversaw student loan cancellations for more than 5 million borrowers. Despite the Supreme Court’s rejection of his signature proposal for extensive relief, he waived more than $183.6 billion in student loans through an expanded forgiveness program.
In a statement Monday, McMahon said Biden had gone too far.
“From now on, the Ministry of Education will work with the Ministry of Finance to take responsibility and shake up the student loan program in accordance with the law. This means helping borrowers return to repayment for their financial health and the national economic outlook,” she said.
Adriana Morga, Associated Press Writer in New York, contributed to this report.
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Original issue: April 21, 2025, 4:05pm EDT
