How to Know if Student Loans Are in Default Before Change Happens Next Week
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources.
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A major shift in federal student loan policy takes effect May 5 as the U.S. Department of Education begins reporting defaulted loans to credit agencies again—a move that could impact millions of Americans' financial standing.
The change ends a pandemic-era pause in negative credit reporting and renews pressure on borrowers who remain behind on payments.
Why It Matters
Roughly 43 million Americans hold student loans, with an estimated 9 million currently behind on payments or already in default.
Those with loans more than 270 days delinquent are considered in default, which until now had not been reported to credit agencies due to the federal "Fresh Start" initiative launched during the COVID-19 pandemic.
That program suspended the negative consequences of default, including damaged credit scores. But beginning May 5, defaulted loans will once again be reported, lowering affected borrowers' credit ratings and potentially increasing the cost of borrowing for everything from car loans to mortgages.
A person walks past the U.S. Department of Education on March 20, 2025 in Washington, DC.
A person walks past the U.S. Department of Education on March 20, 2025 in Washington, DC.What To Know
To check your default status, you can log into StudentAid.gov with your FSA ID. The dashboard will show if any loans are in the danger zone. You can also request a free credit report from AnnualCreditReport.com to see the status of these loans.
The May deadline ends a three-year reprieve designed to give borrowers time to get back on track. After that date, defaulted borrowers will see their loans sent to credit reporting agencies unless they take steps to rehabilitate their loans or enter a new repayment plan.
Borrowers with loans still in default may also become subject to collections, wage garnishments, and Treasury offsets, which allow the federal government to withhold tax refunds to recoup unpaid balances.
The Department of Education has urged those in default to take action before the credit reporting resumes.
For those who find themselves in default, loan rehabilitation is possible if you make nine monthly payments within 10 months.
What People Are Saying
Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek: "In a few days, the party's officially over for defaulted student loans. After a 5-year pandemic pause, what's left of the Department of Education is dusting off those collection tools. Wage garnishment, snagging your tax refunds, even dipping into Social Security benefits. Trust me, that's not how anyone wants to kickstart their summer."
Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: "During the pandemic, one measure enacted to provide financial relief was to put a pause on student loan payments being due for borrowers. This also included lenders reporting defaults and delinquencies to credit bureaus. However, in May, this all changes, as the Department of Education has announced those records will start being reported to credit entities again."
What Happens Next
The Department of Education plans to notify borrowers in default by early May. But those who do not act in time may face immediate consequences.
"If you're a borrower who has gone into default or delinquency, now is the time to start verifying what you owe and making plans to resume payments," Beene said. "Continuing to miss payments will not just result in doing further damage to your credit score, but it could also lead to your wages being garnished to start to recoup those monthly payment amounts."
Experts continue to encourage individuals to review their accounts and make necessary adjustments before the policy takes effect.
"The worst thing you can do? Stick your head in the sand," Ryan said. "I mean, who wants up to 15 percent of their paycheck suddenly disappearing or watching their tax refund vanish into thin air?"
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