Federal student loan collections resume next month
April 21 (UPI) -- The federal government plans to resume collections on defaulted student loans for the first time in more than five years, starting next month.
The U.S. Department of Education announced Monday that its Office of Federal Student Aid will require borrowers, currently in default, to resume repaying their student loans, beginning May 5th. The department has not collected on defaulted loans since March 2020, at the start of the COVID-19 pandemic.
According to the Trump administration, 42.7 million borrowers owe more than $1.6 trillion in student debt, and more than 5 million borrowers have not made a monthly payment in more than 360 days.
"Only 38% of borrowers are in repayment and current on their student loans," according to the department. "Most of the remaining borrowers are either delinquent on their payments, in an interest-free forbearance or in an interest-free deferment."
"American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies," said Education Secretary Linda McMahon.
"The Biden administration misled borrowers: the executive branch does not have the constitutional authority to wipe debt away, nor do the loan balances simply disappear," McMahon added. "Hundreds of billions have already been transferred to taxpayers."
"Going forward, the Department of Education, in conjunction with the Department of Treasury, will shepherd the student loan program responsibly and according to law, which means helping borrowers return repayment -- both for the sake of their own financial health and our nation's economic outlook."
Earlier this year, the Trump administration ended online applications for the Income Driven Repayment plan, which allows borrowers to repay their student loans based on how much money they make. Those online applications reopened last month.
In October 2023, Congress ordered student and parent borrowers to begin repaying their student loans after the Biden administration failed to lift the collections pause and failed to process applications for income-driven repayment, according to the Education Department, which called the "illegal loan forgiveness schemes" a way to "win points with borrowers and mask rising delinquency and default rates."
Before repayment begins in two weeks, borrowers in default will receive email communications from FSA about resuming monthly payments, along with information for loan rehabilitation for those who need extra assistance. Later this summer, FSA will send notices regarding administrative wage garnishment.
"FSA will conduct a robust communications campaign to engage all borrowers on the importance of repayment," according to the department. Information also will be posted on the website StudentAid.gov, starting next week.
FSA plans to work with states, universities, colleges and financial aid administrators to "restore commonsense and fairness with the message: student and parent borrowers -- not taxpayers -- must repay their student loans."
"There will not be any mass loan forgiveness," the Department of Education warned Monday.
"Together, these actions will move the federal student loan portfolio back into repayment, which benefits borrowers and taxpayers alike."
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