Education Department to Restart Student Loan Debt Collections

In a statement this week, the Department of Education warned that millions of borrowers could be referred to debt collectors and face paycheck deductions as it resumes collections on defaulted student loans in May.

The federal government had paused student loan repayments in March 2020 due to the COVID-19 pandemic, allowing borrowers in forbearance to delay payments. However, the Department announced that collections will restart on May 5, and those in default may be enrolled in income-based repayment plans or referred to debt collectors.

Throughout his administration, President Biden aimed to help borrowers by seeking loan forgiveness or reinstating good standing for those in default. However, the Supreme Court blocked his proposal to forgive up to $20,000 in loans for millions, and the Biden-backed SAVE repayment plan, which adjusts payments based on income and family size, has been on hold since August.

The Trump administration had consistently made clear that no large-scale loan forgiveness would be offered.

The Department of Education revealed that more than 42 million Americans owe over $1.6 trillion in federal student loan debt, with more than five million borrowers failing to make a payment in the past year. Borrowers in default will be notified by email in the coming weeks, and by summer, some could experience automatic deductions from their paychecks.