Latest news with #FederalFamilyEducationLoanProgram
Yahoo
07-05-2025
- Business
- Yahoo
Some Student Loan Borrowers Could Have Their Wages Garnished
Yahoo is using AI to generate takeaways from this article. This means the info may not always match what's in the article. Reporting mistakes helps us improve the experience. Yahoo is using AI to generate takeaways from this article. This means the info may not always match what's in the article. Reporting mistakes helps us improve the experience. Yahoo is using AI to generate takeaways from this article. This means the info may not always match what's in the article. Reporting mistakes helps us improve the experience. Generate Key Takeaways The U.S. Department of Education has announced that it is resuming collections of defaulted student loans, starting on May 5. In an April 21, 2025, news release, the DOE wrote that it "has not collected on defaulted loans since March 2020. Resuming collections protects taxpayers from shouldering the cost of federal student loans that borrowers willingly undertook to finance their postsecondary education." The DOE added: "This initiative will be paired with a comprehensive communications and outreach campaign to ensure borrowers understand how to return to repayment or get out of default." According to CNN, federal student loans "go into default after 270 days without payment." The news release explains how the process will work, and says it could involve garnishing people's wages. "All borrowers in default will receive email communications from FSA over the next 2 weeks making them aware of these developments and urging them to contact the Default Resolution Group to make a monthly payment, enroll in an income-driven repayment plan, or sign up for loan rehabilitation," the release says. "Later this summer, FSA will send required notices beginning administrative wage garnishment. The Department will also authorize guaranty agencies that they may begin involuntary collections activities on loans under the Federal Family Education Loan Program," it adds. A person walks past the U.S. Department of Education on March 20, 2025 in Washington, DC. U.S. President Donald Trump is preparing to sign an executive order to abolish the Department of wage garnishment allows the government "to order a non-federal employer to withhold a percentage of an employee's income to pay a delinquent debt," CNN explained. According to CNN, the administration plans to reinstitute a program that allows "garnishing federal and state payments, such as tax returns or social security benefits." The DOE wrote that Congress "mandated that student and parent borrowers begin to repay their student loans in October 2023." 'American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,' said U.S. Secretary of Education Linda McMahon in the news release. She said the executive branch "does not have the constitutional authority to wipe debt away, nor do the loan balances simply disappear." The Student Borrower Protection Organization, an advocacy group, wrote in a news release that the move was sending student loan borrowers "into the maw of the government debt collection machine.' The action will "begin subjecting millions of Americans in default to mandatory collections, including wage garnishment, tax refund, and Social Security benefit offsets," the group wrote. But McMahon painted the move as necessary for borrowers' "financial health and our nation's economic outlook." "Hundreds of billions have already been transferred to taxpayers," McMahon wrote. The news release says that "42.7 million borrowers owe more than $1.6 trillion in student debt." It adds that more than 5 million borrowers "have not made a monthly payment in over 360 days and sit in default—many for more than seven years—and 4 million borrowers are in late-stage delinquency (91-180 days). As a result, there could be almost 10 million borrowers in default in a few months." That would amount to "almost 25 percent" of student loans, the press release noted, adding that "only 38 percent of borrowers are in repayment and current on their student loans." The release says that all "FSA collection activities are required under the Higher Education Act and conducted only after student and parent borrowers have been provided sufficient notice and opportunity to repay their loans under the law. "
Yahoo
01-05-2025
- Business
- Yahoo
Involuntary Collections Explained for Student Loan Borrowers
Students studying in a library. Credit - Maskot—Getty Images The U.S. Department of Education announced on April 21 that the Office of Federal Student Aid (FSA) will restart its student debt collections on May 5. The announcement marks the first time in five years that the federal government may penalize Americans who fall behind on their student loan payments. Part of that penalization includes the resumption of 'involuntary collections,' which can lead to the garnishing of wages. According to the announcement, borrowers will begin receiving collection notices through the U.S. Treasury Offset Program before any further action is taken. 'The Department will also authorize guaranty agencies that they may begin involuntary collections activities on loans under the Federal Family Education Loan Program,' per the press release. There is the disclaimer, though, that 'all FSA collection activities are required under the Higher Education Act and conducted only after student and parent borrowers have been provided sufficient notice and opportunity to repay their loans under the law.' Involuntary collections are 'one of the harshest consequences borrowers can face when federal student loans fall into default,' says Ken Ruggiero, co-founder and CEO of Ascent Funding, an education loan provider. This occurs typically after 270 days, or close to nine months, of missed payments. 'It's an aggressive, automated system that often catches borrowers off guard and deepens their financial hardship,' says Ruggiero. 'In addition to the financial hardship, the student borrower is often embarrassed when their employer is notified and then implements wage garnishments.' Here is what student borrowers should know about involuntary collections, and the advice experts offer: Through involuntary collections, the government can garnish wages, withhold tax refunds, and seize portions of Social Security checks and other benefit payments to go toward paying back the federal loan. According to the Treasury Department, for those who have defaulted on their federal loans, the Treasury Offset Program can withhold to 100% of federal tax refunds, up to 15% of federal salaries, up to 15% of Social Security and Railroad Retirement benefits, up to 25% of federal retirement payments, 100% of payments to vendors, and 100% of travel payments for federal employees. Wage garnishment, which the Education Department's announcement said will begin late in the summer, is when your loan holder can order your employer to withhold up to 15% of your disposable pay to collect your defaulted debt, without taking you to court. Department of Education Secretary Linda McMahon wrote an opinion piece in the Wall Street Journal in conjunction with the announcement of collections restarting, in which she articulated the department's outlook. 'Borrowers who don't make payments on time will see their credit scores go down, and in some cases their wages automatically garnished,' she wrote. 'Why? Not because we want to be unkind to student borrowers. Borrowing money and failing to pay it back isn't a victimless offense.' Jonathan Collins, assistant professor of political science and education at Teachers College, Columbia University, says that though this is a pre-2020 system, there is a difference here with the Trump Administration. 'Usually standard practice for the federal government is to work with the borrowers, and if there are issues with repayment, they usually grant forbearance periods, and you can apply for extension on forbearance periods,' Collins says. 'But, what [The Trump Administration is] trying to do is get rid of, if not drastically reduce, the amount of people who are in this forbearance zone.' Experts' main advice is to be proactive and act now. 'All of the responsibility is on the borrower,' says Nicholas Hillman, professor in the school of education at the University of Wisconsin-Madison. But there are options out there for borrowers. Ruggerio suggests that those struggling to meet payments should explore an income-driven repayment (IDR) plan, with the intention of reducing their monthly payments in accordance with their income and family size. 'The window to get out of default through options like consolidation or rehabilitation is still open—waiting until collections begin only limits your options,' he says. On Feb. 18, 2025, a federal court issued a new injunction preventing the Department of Education from implementing the Saving on a Valuable Education (SAVE) plan. But other repayment programs remain available, including the Pay As You Earn (PAYE) program and the Income-Contingent Repayment (ICR) plan. Hillman recommends navigating through the federal loan servicers to identify who your loan servicer is, and then contacting said federal loan servicer for further information. Collins adds that in order to do this, borrowers must first make sure that their loans were federally supplied, rather than serviced through the private sector. This way, borrowers can have a clear idea of where their loan stands. Khandice Lofton, counsel at the Student Protection Borrower Center (SPBC), recommends that borrowers look at the National Consumer Law Center (NCLC), which has a toolkit that provides information for how borrowers can seek consolidation or rehabilitation—two ways borrowers can get out of default by either making payments or consolidating their loans. Furthermore, Lofton also recommends looking into legal and political modes of protesting the way in which the Trump Administration is continuing the student federal loan collections. 'What we're pushing right now is for every borrower to take steps to reach out to their elected officials. Why? Because these officials [are] now responsible for helping them get engaged in government programs,' she says. Part of the confusion related to involuntary collections, experts say, relates to both the pause on student loan collections and repayments brought about by the COVID-19 pandemic—a pause which occurred from March 2020 until September 2023, as well as the efforts by former President Joe Biden to grant student loan forgiveness—attempts that were struck down at the courts and differ from President Donald Trump and his Administration. Still, federal student loan repayments began again in Oct. 2023, though the Biden Administration gave one year as an 'on ramp' for borrowers to transition back to repayments, notes Hillman. For that one year—from Oct. 1, 2023 until Sept. 30, 2024—the records of student borrowers who missed monthly payments would not be considered delinquent, nor would the individuals be reported to credit bureaus, sent to collections, or referred to the Treasury Offset Program. But after Sept. 30, 2024, Hillman says the 'ramp was closed, and it's sort of business as usual'—a return to the 2020 repayment system. And now, starting May 5, major consequences may be felt by around 9.7 million borrowers who are past due on their bills since the end of the relief period, according to the Federal Reserve Bank of New York. But, the confusion regarding these systems, Hillman argues, means that many Americans may have defaulted on their student loans without fully understanding the consequences. This is exacerbated as Biden's SAVE program makes its way through the courts and Republicans propose to overhaul the repayment plans, all while the Trump Administration attempts to dismantle the Department of Education, which houses the FSA. 'It's so confusing for borrowers,' says Lofton. 'Borrowers should understand this isn't their fault, and they shouldn't be forced to pay the price for this dysfunction that's going on right now.' Lofton also argues that the Trump Administration's commitment to restarting collections is misaligned with the affordability arguments upon which the President campaigned. 'This could not have come at a worse time where things right now are so uncertain, financially and economically, and during a time where borrowers are already struggling to pay for things like rent, groceries, medical bills, just day to day life,' Lofton says. The important thing to remember, Hillman notes, is that student loan borrowers who have found themselves in limbo are not alone. 'You have like a third of borrowers who are current, they're making payments. You have a third of borrowers who are either in some sort of deferment or forbearance … and the other third are either going for or [already] in default,' Hillman says. "It's massive, because the loan repayment system is fundamentally broken.' Contact us at letters@
Time Magazine
01-05-2025
- Business
- Time Magazine
What to Know About ‘Involuntary Collections' If You're a Student Loan Borrower
The U.S. Department of Education announced on April 21 that the Office of Federal Student Aid (FSA) will restart its student debt collections on May 5. The announcement marks the first time in five years that the federal government may penalize Americans who fall behind on their student loan payments. Part of that penalization includes the resumption of 'involuntary collections,' which can include the garnishing of wages. According to the announcement, borrowers will begin receiving collection notices through the U.S. Treasury Offset Program before any further action is taken. 'The Department will also authorize guaranty agencies that they may begin involuntary collections activities on loans under the Federal Family Education Loan Program,' per the press release. There is the disclaimer, though, that 'all FSA collection activities are required under the Higher Education Act and conducted only after student and parent borrowers have been provided sufficient notice and opportunity to repay their loans under the law.' Involuntary collections are 'one of the harshest consequences borrowers can face when federal student loans fall into default,' says Ken Ruggiero, co-founder and CEO of Ascent Funding, an education loan provider. This occurs typically after 270 days, or close to nine months, of missed payments. 'It's an aggressive, automated system that often catches borrowers off guard and deepens their financial hardship,' says Ruggiero. 'In addition to the financial hardship, the student borrower is often embarrassed when their employer is notified and then implements wage garnishments.' Here is what student borrowers should know about involuntary collections, and the advice experts offer: What can be withheld under involuntary collections? Through involuntary collections, the government can garnish wages, withhold tax refunds, and seize portions of Social Security checks and other benefit payments to go toward paying back the federal loan. According to the Treasury Department, for those who have defaulted on their federal loans, the Treasury Offset Program can withhold to 100% of federal tax refunds, up to 15% of federal salaries, up to 15% of Social Security and Railroad Retirement benefits, up to 25% of federal retirement payments, 100% of payments to vendors, and 100% of travel payments for federal employees. Wage garnishment, which the Education Department's announcement said will begin late in the summer, is when your loan holder can order your employer to withhold up to 15% of your disposable pay to collect your defaulted debt, without taking you to court. What have Trump officials said about involuntary collections? Department of Education Secretary Linda McMahon wrote an opinion piece in the Wall Street Journal in conjunction with the announcement of collections restarting, in which she articulated the department's outlook. 'Borrowers who don't make payments on time will see their credit scores go down, and in some cases their wages automatically garnished,' she wrote. 'Why? Not because we want to be unkind to student borrowers. Borrowing money and failing to pay it back isn't a victimless offense.' Jonathan Collins, assistant professor of political science and education at Teachers College, Columbia University, says that though this is a pre-2020 system, there is a difference here with the Trump Administration. 'Usually standard practice for the federal government is to work with the borrowers, and if there are issues with repayment, they usually grant forbearance periods, and you can apply for extension on forbearance periods,' Collins says. 'But, what [The Trump Administration is] trying to do is get rid of, if not drastically reduce, the amount of people who are in this forbearance zone.' What can student borrowers do to avoid involuntary collections? Experts' main advice is to be proactive and act now. 'All of the responsibility is on the borrower,' says Nicholas Hillman, professor in the school of education at the University of Wisconsin-Madison. But there are options out there for borrowers. Ruggerio suggests that those struggling to meet payments should explore an income-driven repayment (IDR) plan, with the intention of reducing their monthly payments in accordance with their income and family size. 'The window to get out of default through options like consolidation or rehabilitation is still open—waiting until collections begin only limits your options,' he says. On Feb. 18, 2025, a federal court issued a new injunction preventing the Department of Education from implementing the Saving on a Valuable Education (SAVE) plan. But other repayment programs remain available, including the Pay As You Earn (PAYE) program and the Income-Contingent Repayment (ICR) plan. Hillman recommends navigating through the federal loan servicers to identify who your loan servicer is, and then contacting said federal loan servicer for further information. Collins adds that in order to do this, borrowers must first make sure that their loans were federally supplied, rather than serviced through the private sector. This way, borrowers can have a clear idea of where their loan stands. Khandice Lofton, counsel at the Student Protection Borrower Center (SPBC), recommends that borrowers look at the National Consumer Law Center (NCLC), which has a toolkit that provides information for how borrowers can seek consolidation or rehabilitation—two ways borrowers can get out of default by either making payments or consolidating their loans. Furthermore, Lofton also recommends looking into legal and political modes of protesting the way in which the Trump Administration is continuing the student federal loan collections. 'What we're pushing right now is for every borrower to take steps to reach out to their elected officials. Why? Because these officials [are] now responsible for helping them get engaged in government programs,' she says. Understanding the timeline of student loan relief over the last few years Part of the confusion related to involuntary collections, experts say, relates to both the pause on student loan collections and repayments brought about by the COVID-19 pandemic—a pause which occurred from March 2020 until September 2023, as well as the efforts by former President Joe Biden to grant student loan forgiveness —attempts that were struck down at the courts and differ from President Donald Trump and his Administration. Still, federal student loan repayments began again in Oct. 2023, though the Biden Administration gave one year as an 'on ramp' for borrowers to transition back to repayments, notes Hillman. For that one year—from Oct. 1, 2023 until Sept. 30, 2024—the records of student borrowers who missed monthly payments would not be considered delinquent, nor would the individuals be reported to credit bureaus, sent to collections, or referred to the Treasury Offset Program. But after Sept. 30, 2024, Hillman says the 'ramp was closed, and it's sort of business as usual'—a return to the 2020 repayment system. And now, starting May 5, major consequences may be felt by around 9.7 million borrowers who are past due on their bills since the end of the relief period, according to the Federal Reserve Bank of New York. But, the confusion regarding these systems, Hillman argues, means that many Americans may have defaulted on their student loans without fully understanding the consequences. This is exacerbated as Biden's SAVE program makes its way through the courts and Republicans propose to overhaul the repayment plans, all while the Trump Administration attempts to dismantle the Department of Education, which houses the FSA. 'It's so confusing for borrowers,' says Lofton. 'Borrowers should understand this isn't their fault, and they shouldn't be forced to pay the price for this dysfunction that's going on right now.' Lofton also argues that the Trump Administration's commitment to restarting collections is misaligned with the affordability arguments upon which the President campaigned. 'This could not have come at a worse time where things right now are so uncertain, financially and economically, and during a time where borrowers are already struggling to pay for things like rent, groceries, medical bills, just day to day life,' Lofton says. The important thing to remember, Hillman notes, is that student loan borrowers who have found themselves in limbo are not alone. 'You have like a third of borrowers who are current, they're making payments. You have a third of borrowers who are either in some sort of deferment or forbearance … and the other third are either going for or [already] in default,' Hillman says. "It's massive, because the loan repayment system is fundamentally broken.'
Yahoo
23-04-2025
- Business
- Yahoo
Some federal student loan collections resume May 5. What does it mean for Ohio borrowers?
The U.S. Department of Education will soon start federal student loan collections for certain accounts on May 5. But what does this mean for Ohio? USDE announced Monday Federal student loan collections are currently on pause until May 5. The Biden-Harris administration refused to lift the pause in October 2023, after Congress mandated that student and parent borrowers should begin to repay their student loans. According to the DOE press release, this act by 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." The press release states that resuming student loan collections will "protect taxpayers." Lifting the pause will also be accompanied by information to ensure borrowers understand how to resume repayment or exit default. On Monday, May 5, Federal Student Aid will restart its Treasury Offset Program, administered by the U.S. Department of the Treasury. If you're a federal student loan borrower, you should receive an email about loan repayments over the next two weeks. Borrowers will have to contact the Default Resolution Group to make a monthly payment, enroll in an income-driven repayment plan, or sign up for loan rehabilitation. This campaign is meant to "restore commonsense and fairness" by urging student and parent borrowers to repay their loans. The department has also authorized guaranty agencies to begin involuntary collections activities for loans under the Federal Family Education Loan Program. According to a 2024 study, Ohio takes the No. 9 spot for the states with the most student loan debt. The ranking compared all 50 states' average student loan debt along with the unemployment rate among 25 to 34-year-olds. Ohio is one of the top states that bear the burden of student debt. Additionally, Ohio was No. 7 for the student debt-to-income ratio and in the top 20 for the proportion of students with debt and the average amount of student debt. Nationally, 42.7 million borrowers owe more than $1.6 trillion in student debt, according to the DOE press release. Roughly 5.3 million student loan borrowers in the U.S. are currently in default, according to PBS. According to an earlier estimate, the Department of Education's budget for Ohio for fiscal year 2025 estimate is more than $5.65 billion, according to the DOE financial preview. In 2024, the funding estimate was over $5.48 billion. The 2025 estimate represents 3.08% of the DOE's estimated $183.4 billion expenditure in 2025. DOE's most recent data for Ohio's total funding is from the year 2023, with a total of nearly $5.25 billion. Ohio's Department of Education and Workforce reports that Ohio has spent more on primary and secondary education than ever before, with $13.44 billion appropriated for 2025. In March, the Trump Administration said it pledged to dismantle the Education Department. Created by Congress in 1979, the U.S. Department of Education is a cabinet-level government department focused on promoting educational excellence, enhancing student achievement and readiness for global competition, and guaranteeing equal access for students of all ages, according to its website. Here's why the Department of Education was established: Strengthen the federal commitment to equal educational opportunity for all people. Support states, local school systems, the private sector, educational institutions, research institutions, community organizations, parents, and students in improving education quality. Encourage public, parent and student involvement in federal education programs. Advance education quality through federal research and information sharing. Improve the coordination of federal education programs. Enhance management and efficiency of federal education activities by simplifying processes, reducing administrative burdens, and minimizing unnecessary paperwork for fund recipients. Increase the accountability of federal education programs to the president, Congress and the public. Funding to public schools serving millions of students. Manage college financial aid, Pell Grants, and oversee federal student loans. This article originally appeared on The Columbus Dispatch: Some federal student loan collections resume May 5. More on Ohio impact
Yahoo
22-04-2025
- Business
- Yahoo
Department of Education to resume collecting student loan payments. Here's what to know
Starting May 5, the U.S. Department of Education will resume collections of defaulted student loans. The Department of Education says it had not collected payments since March 2020, and that over five million borrowers have not made a payment within the last year. The initiative will be paired with a comprehensive communications and outreach campaign in order to ensure borrowers understand how to return to payments or get out of default, says the U.S. Department of Education. Currently, there are over 42.7 million student loan borrowers in the U.S., who owe a collective debt of $1.6 trillion, and that number is expected to increase as an additional four million borrowers are nearing default status, according to a U.S. Department of Education press release. Over the next two weeks, the Department of Education says it will be notifying borrowers who are in default via email, recommending that they contact the Default Resolution Group to make a payment or enroll in an income-driven repayment plan. On May 5, the Department of Education will then begin referring borrowers who remain in default to the Treasury Offset Program within the U.S. Department of the Treasury. Later in the summer, Federal Student Aid (FSA) will send out required notices that administrative wage garnishment will begin. The Department of Education also says that it will authorize guaranty agencies so that they can begin involuntary collections activities on loans under the Federal Family Education Loan Program. Presley Bo Tyler is a reporter for the Louisiana Deep South Connect Team for Gannett/USA Today. Find her on X @PresleyTyler02 and email at PTyler@ This article originally appeared on Shreveport Times: Will the Department of Education resume student loan collections?
