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Epoch Times
07-05-2025
- Business
- Epoch Times
Crackdown on Student Loan Defaulters to Begin With Benefit Seizure, Then Wage Garnishment
The U.S. government will begin seizing federal benefits from 195,000 student loan defaulters in June, with wage garnishment notices set to reach 5.3 million borrowers later this summer, the Education Department The renewed enforcement effort begins with the Treasury Offset Program, which allows the federal government to intercept tax refunds, Social Security checks, and other federal payments to recover unpaid student debt. Borrowers affected by the program began receiving notices this week, the department said. 'Starting today, approximately 195,000 defaulted student loan borrowers will begin receiving an official 30-day notice from the U.S. Department of Treasury notifying them that their federal benefits will be subjected to the Treasury Offset Program,' the Education Department said in Monday's announcement. Following the notice period, administrative wage garnishment will begin later this summer for all 5.3 million borrowers who remain in default. Guaranty agencies have also been authorized to resume involuntary collections on defaulted loans under the Federal Family Education Loan (FFEL) Program, the department added. The move officially ends a pandemic-era freeze first imposed in March 2020 under President Donald Trump and extended multiple times under the Biden administration. Although payments officially resumed in fall 2023, most collection efforts remained paused—until now. In an April 21 percent of the 42.7 million federal student loan borrowers were current on their loans, while nearly 10 million were delinquent or in default. The remainder were in forbearance, deferment, or grace periods. Related Stories 5/6/2025 5/5/2025 'Student and parent borrowers–not taxpayers–must repay their student loans,' the Education Department said at the time. 'There will not be any mass loan forgiveness.' As of early 2025, To help borrowers avoid wage garnishment or benefit offset, Federal Student Aid (FSA) has launched direct outreach and expanded support services, encouraging borrowers to enroll in income-driven repayment (IDR) plans, make voluntary payments, or begin loan rehabilitation. Alongside the repayment restart, the Education Department also issued a Dear Colleague The letter reminded institutions that the cohort default rate—the share of former students who default soon after leaving school—must stay below 40 percent in a single year or 30 percent for three years in a row, or the school risks losing access to Pell Grants and federal student loans. To mitigate that risk, the department urged schools to immediately contact former students with reminders of their loan obligations and information on repayment plans. 'As we begin to help defaulted borrowers back into repayment, we must also fix a broken higher education finance system that has put upward pressure on tuition rates without ensuring that colleges and universities are delivering a high-value degree to students,' Secretary of Education Linda McMahon said in a statement. 'For too long, insufficient transparency and accountability structures have allowed U.S. universities to saddle students with enormous debt loads without paying enough attention to whether their own graduates are truly prepared to succeed in the labor market.' The department also said it plans to publish institution-level nonpayment rates later this month to increase transparency and accountability across the higher education sector. The enforcement restart follows the collapse of former President Joe Biden's sweeping student loan forgiveness plan, which aimed to cancel hundreds of billions in debt through executive action. The Supreme Court struck down the plan in 2023, ruling that the administration lacked the authority to cancel loans without congressional approval. In April, McMahon made clear that the department would no longer pursue blanket debt forgiveness. 'American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,' McMahon said in April. 'The executive branch does not have the constitutional authority to wipe debt away, nor do the loan balances simply disappear.' While supporters of Biden's proposal argued that widespread forgiveness would reduce inequality and stimulate economic growth, critics said it was fiscally reckless and unfair to borrowers who had already repaid their loans—or never borrowed at all.
Time of India
06-05-2025
- Business
- Time of India
US restarts student loan collections: 10 things you need to know
Here are the 10 things you should know 1. When did collections resume? 2. What happens if I'm in default? 3. Can I avoid collections by enrolling in a repayment plan? 4. How do I apply for an income-driven repayment plan? 5. What support tools are available? 6. Will there be any more loan-forgiveness programmes? 7. Why is the Department restarting collections now? 8. What is the current state of student-loan debt? 9. How many borrowers are impacted? 10. Who else is involved in the outreach effort? The US Department of Education has announced that, as of Monday 5 May 2025, it will resume all collections activities on defaulted federal student loans , the first time since March 2020 that borrowers in default will face involuntary repayment measures. The pause on collections, implemented at the outset of the Covid-19 pandemic and upheld by the Biden administration until October 2023 for general repayments, had left millions of borrowers in limbo, with little clarity on how to return to good standing. Now, amid record-high delinquency rates and more than $1.6 trillion in outstanding debt, the Department says it is renewing its efforts both to protect taxpayers and to guide borrowers back into manageable repayment Secretary Linda McMahon framed the move as a restoration of fairness: 'American taxpayers will no longer be forced to serve as collateral for irresponsible student-loan policies,' she said. The Department has paired the restart of collections with a comprehensive communications and outreach campaign, promising clearer guidance on income-driven repayment plans loan rehabilitation and a new, streamlined set of online tools. At the same time, guaranty agencies will be authorised to begin involuntary collections on Federal Family Education Loan (FFEL) Programme loans, and the Treasury Offset Programme will once more divert tax refunds and federal salary payments to cover unpaid advocates warn that the resumption of collections could impose significant strain on households already stretched by inflation and rising living costs. Credit-bureau data show that roughly one in five borrowers is 'seriously delinquent' 90 days or more past due and that default can cost an average credit-score loss of 63 points, rising to 175 points for those previously deemed 'super-prime'. As borrowers face wage garnishment, tax-refund seizures and the threat of Social Security offsets, many will need to act swiftly to avoid long-term damage to their financial on defaulted federal student loans restarted on Monday May 5. Borrowers in default should already have received emails from the Office of Federal Student Aid (FSA) notifying them of these you remain in default, the Treasury Offset Programme can withhold your federal tax refunds and up to 15% of your disposable federal salary or benefit payments (including Social Security).Yes. You may contact the Default Resolution Group to make monthly payments, sign up for loan rehabilitation (making a set number of payments to erase default status), or enrol in an income-driven repayment (IDR) Department says it will begin processing IDR plan applications (including Income-Based Repayment, Income-Contingent Repayment and PAYE) next month. A simplified online IDR process will eliminate annual income has launched a new Loan Simulator, an AI Assistant ('Aiden'), extended servicer call times and enhanced online resources at to help you select and enrol in the best plan for your Department has stated explicitly that there will be no further mass loan-forgiveness schemes. Any future relief will be targeted, not to Secretary McMahon, resuming collections protects US taxpayers—who finance federal student loans—from shouldering unpaid balances, and encourages borrowers to restore their credit and financial 42.7 million borrowers owe more than $1.6 trillion. Over 5 million have not made a payment for more than a year and 4 million are in late-stage delinquency (91–180 days past due).Nearly 10 million borrowers could be in default within months if current trends continue — almost a quarter of the entire federal-loan will partner with states, institutions, financial-aid administrators, college-access organisations, servicers and other stakeholders to ensure borrowers receive clear, consistent information and support.
