The Trump administration announced Monday it will resume involuntary collections on defaulted federal student loans starting May 5, ending a five-year pause and potentially impacting millions of Americans already facing financial hardship.
The Department of Education (DOE) confirmed that garnishment of wages, tax refunds, and Social Security benefits will resume under the U.S. Treasury Offset Program later this summer, alongside “other actions to help borrowers get back into repayment,” as the department described.
“Resuming collections protects taxpayers from shouldering the cost of federal student loans that borrowers willingly undertook to finance their post-secondary education,” the DOE said in a statement.
The move is part of a broader Trump administration initiative to restructure the $1.6 trillion federal student loan system. Education Secretary Linda McMahon defended the plan Monday, stating, “American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies.”
Borrowers will begin receiving notices from the DOE urging them to make a payment or enroll in a repayment plan. Those who do not act by May 5 will be referred to a collections program managed by the Treasury Department.
The government has not collected on defaulted federal student loans since March 2020, when the first Trump administration paused payments amid the Covid-19 pandemic. The Biden administration extended the pause through 2023 and launched new relief measures including the Saving on a Valuable Education (SAVE) plan. However, the U.S. Supreme Court struck down Biden’s broader debt cancellation initiative in 2023, and the SAVE plan is currently blocked by a federal appellate court.
“While Congress mandated that student and parent borrowers begin to repay their student loans in October 2023, the Biden-Harris administration refused to lift the collections pause and kept borrowers in a confusing limbo,” the DOE stated. “The previous administration failed to process applications for borrowers who applied for income-driven repayment and continued to push misguided ‘on-ramps’ and illegal loan forgiveness schemes to win points with borrowers and mask rising delinquency and default rates.”
McMahon added, “Hundreds of billions have already been transferred to taxpayers.”
“Going forward,” she continued, “the Department of Education, in conjunction with the Department of Treasury, will shepherd the student loan program responsibly and according to the law, which means helping borrowers return to repayment—both for the sake of their own financial health and our nation’s economic outlook.”
The DOE has warned that up to 10 million borrowers could be in default in the coming months, up from the 5.6 million already in default at the end of 2024. That would account for approximately 25% of the federal loan portfolio.
The administration is also working to dismantle relief programs. Last month, the American Federation of Teachers filed a lawsuit after the DOE cut off access to income-driven repayment plan applications and “secretly ordered student loan services to stop accepting and processing such applications.”
The economic risks of resumed collections are drawing sharp criticism. Aissa Canchola Bañez, policy director for the Student Borrower Protection Center, said, “This could not have come at a worst time for millions of Americans… [They] are already finding themselves having to navigate such incredible economic uncertainty over the last few months.”
Bañez pointed to the disproportionate impact on older borrowers. “These are older folks who are on fixed incomes,” she said, referencing a 2017 report from the Consumer Financial Protection Bureau that found nearly 40 percent of federal borrowers over age 65 were in default.
According to the Education Department, borrowers who remain in default will have their wages garnished beginning later this summer, meaning automatic deductions from their paychecks. Borrowers who fall behind may also see their credit scores plummet, further limiting their access to basic financial services, including housing and car loans.
Moody’s Analytics chief economist Mark Zandi told The New York Times that “many of the households required to resume paying on their student loans are also struggling with credit card debt at near-record interest rates and high-rate mortgages they thought they would be able to refinance into a lower rate, but haven’t.”
The Student Debt Crisis Center (SDCC) also criticized the administration’s decision to restart collections during an ongoing housing and affordability crisis. “Parents delaying retirement. Grads postponing families. This isn’t 45 million separate problems, it’s one national crisis,” the organization wrote on social media.
“They bailed out banks, corporations, and airlines. But when it comes to student debt? Suddenly it’s ’too expensive,’” SDCC added.
In a statement, SDCC executive director Mike Pierce said, “Federal law gives borrowers a way out of default and the right to make loan payments they can afford. Since February, Donald Trump and Linda McMahon have blocked these borrowers’ path out of default and are now feeding them into the maw of the government debt collection machine.”
“This is cruel, unnecessary, and will further fan the flames of economic chaos for working families across this country,” he said.
Meanwhile, advocacy groups are calling attention to the Trump administration’s broader goals, including dismantling the Department of Education—a central aim of Project 2025, a Heritage Foundation-led blueprint to significantly shrink the federal government. Trump has ordered the transfer of federal student loan administration to the Small Business Administration, which was previously headed by McMahon.
Some critics argue the solution is not more collections, but systemic reform. The Debt Collective, a debtors’ union, wrote, “If the Trump/Musk administration really wanted ‘government efficiency,’ then they wouldn’t be collecting on debts people cannot and will not pay. They would just cancel it and boost the economy.”
With tens of millions of borrowers navigating restarted payments, blocked relief plans, and rising financial pressure, the administration’s decision to resume punitive collections is already being cast as a defining economic fault line—one that could reverberate through households, markets, and elections in the months ahead.
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