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Int'l Business Times
06-05-2025
- Business
- Int'l Business Times
Education Department Urges Colleges to Aid Student Loan Borrowers as Collections Resume
WASHINGTON — The U.S. Education Department issued a "Dear Colleague Letter" to colleges and universities Monday, reinforcing their role in supporting student loan borrowers under Title IV of the Higher Education Act of 1965. The guidance, released as involuntary collections on federal student loans resume after a pandemic-era pause, underscores institutions' responsibility to help graduates manage repayment amid rising college costs. The department emphasized that while borrowers are primarily responsible for repaying loans, colleges play a key role in improving repayment outcomes. Institutions are urged to ensure former students understand their obligations and can access accounts for resources. The department will publish nonrepayment rates by institution on the Federal Aid Data Center later this month, using College Scorecard data to promote accountability. "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," said Education Secretary Linda McMahon. "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." Under the Higher Education Act, colleges with high cohort default rates risk losing eligibility for federal aid, including Pell Grants and loans. The department called for proactive outreach to delinquent or defaulted borrowers before June 30, 2025, to address loans not in deferment or forbearance. The resumption of involuntary collections affects approximately 195,000 defaulted borrowers, who will receive 30-day notices from the Treasury Department starting Monday. These notices indicate federal benefits, including June checks, will be subject to the Treasury Offset Program. By summer, all 5.3 million defaulted borrowers will face administrative wage garnishment. The Federal Student Aid office is bolstering support with extended call center hours and increased capacity to guide borrowers toward income-driven repayment plans, loan rehabilitation, or affordable payments. Resources are available at Guaranty agencies are also authorized to resume collections on Federal Family Education Loan Program loans, with all actions adhering to legal requirements for notice and repayment opportunities. The department's guidance reflects a broader push for transparency in higher education, leveraging repayment data to ensure colleges prioritize student success and financial literacy. Institutions' engagement with borrowers will be critical to maintaining federal funding eligibility. Originally published on University Herald
Yahoo
05-05-2025
- Business
- Yahoo
Mainers worry about repaying student loans as Education Department resumes collection
May 5—For the first time in five years, the federal government on Monday restarted collections on overdue student loan payments — a process that could impact millions of borrowers across the country and in Maine. The return follows years of lenient COVID-era policies meant to provide relief for borrowers and ever-changing options and rules around payment plans and forgiveness, all as Biden-era affordability plans met court challenges. "Repayment has started at this really confusing time for borrowers, when there are a lot of things already going on in the federal student loan system," said Sophie Laing, a student loan and consumer attorney at Pine Tree Legal Assistance, a nonprofit that offers civil legal assistance to low-income Mainers. According to the U.S. Department of Education, which announced in April that it would resume collections, more than 5 million borrowers haven't made a payment in a year and are in default, and only 38% nationally are current on their payments. Mainers hold a collective $6.5 billion in student loan debt, spread between about 186,700 people (or 13% of people in the state), according to data from the Federal Student Aid office and the Education Data Initiative. The average student loan debt in Maine is $34,280. Maine borrowers say they are anxious about the possibility of their tax refunds or disability benefits being seized, and the end of forgiving Biden-era payment plans. "I want to continue to live and work in Portland, and if things change, $500 a month could be the reason that I have to move away, find a new job and move away from my parents, who I need to take care of," a 2010 University of Maine graduate said. "That's really, really weighing on me." A CHANGING LANDSCAPE Laing at Pine Tree Legal said borrowers in Maine right now are struggling to access accurate information and are concerned about the future of payment plans that they rely on. For three years after the start of the pandemic, she said, borrowers didn't have to make federal student loan payments and couldn't go into default or suffer the consequences. Even when required payments resumed in 2023, there was a yearlong "on-ramp" during which repayment had restarted, but the government wouldn't put people into default for falling behind. But starting last September, Laing said, required payments have restarted in earnest, and now the department has marked a new step by beginning to seize funds from defaulted borrowers. There are several ways the government can collect on defaulted loans, including through tax refunds, Social Security retirement and disability payments and wage garnishing. "So that means they can take your tax refund before it ever gets to you and apply it to your student loan," Laing said. "And that can be really difficult. ... A lot of people rely on their tax refund, or earned income tax credit or child tax credit, as an important source of income through the year, to pay for necessities or unexpected expenses that come up." Right now, the government is only focusing on tax refunds and Social Security benefits, but Laing said she expects the department to begin garnishing paychecks by the summer (up to 15% of your disposable pay). At the same time, the status of several income-driven repayment plans has been uncertain because of court challenges. Millions of people had signed up for the Biden administration's SAVE Plan, which offered low monthly payments based on income and family size. However, in February, a U.S. appeals court blocked the plan, siding with Republican-led states that challenged it. Many of the individuals using the plan will now have to apply for another that will increase their monthly payment. Laing said her message for federal student loan borrowers in default is that there are ways to get out of it, like loan consolidation and loan rehabilitation. And she said there are ways to get some or all of your debt canceled, like for borrowers with a disability, or someone who attended a for-profit college that misled students, or Public Service Loan Forgiveness for government and nonprofit employees. "There are steps people can take to prevent the consequences," Laing said. The state of Maine offers its own relief. Since 2022, Maine has offered a Student Loan Repayment Tax Credit program, which provides a tax credit of $2,500 a year and $25,000 total to anyone living and working at least part time in Maine who is paying off students loans from a college degree program. BORROWERS' REGRET A University of Maine alumna, who agreed to talk to the Press Herald on the condition of anonymity out of concern for her employment, said she graduated in 2010 with about $48,000 in student loans and her final two years covered by federal Pell Grants. Now, she said, she regrets the decision. "I didn't understand what I was signing up for. I was really, really young, and it was just, 'Get into college and sign on the dotted line so that you can be accepted,"' she said. "Obviously, we can't know exactly how things would play out, but if I could have the lifestyle that I have now, without a degree, absolutely, I would have not taken out loans." She wanted to be a teacher, but couldn't afford to work in the field, pay off loans and live in southern Maine, so she switched industries. She said the process of paying off her loans has been incredibly confusing, and has had to constantly reapply to income-based repayment plans. But in 2022, then-President Joe Biden announced up to $20,000 of debt cancellation for Pell Grant recipients. "I was ready to go out and buy a bottle of Champagne. I also knew it was probably too good to be true," the UMaine grad said. She applied, and received notice that her application for debt forgiveness had been accepted. "And then it was not even a week before the court said, 'Nope, just kidding, we're not going to forgive that debt.'" Today, she has a job she's happy with in a field unrelated to her degree, but her Portland rent takes up 35% to 40% of her income, and she's the sole caretaker for her parents, who have high medical needs. If an income-based repayment plan is no longer an option, she said, that might be the final straw. Fifteen years after graduation, she still has over $30,000 in debt. Denver Vandrey took out about $5,500 in loans to attend the University of Southern Maine. He said the path from high school straight to college seemed like the only choice. But he didn't graduate, ended up transferring to Southern Maine Community College, and said he has regrets about signing up for loans. "They seem to make it way too easy for you to apply and acquire, but are not really giving you enough information to effectively pay off," he said. "They asked for a lot of trust, and unfortunately, that is something that many people just cannot afford to do." When it came time to pay off his loans, Vandrey said he received an inaccurate number from a payment calculator that led him to pay just barely above interest, so his debt wasn't really moving. Then when he was between jobs, the calculator told him to pay just $64 a month, which resulted in his debt actually increasing. But once he landed a solid job, he paid off most of his debts in one fell swoop. Today he works as a commercial painter. He said he's lucky that he noticed the problem, and that he has a family support system, but said many of his friends with four years worth of student loans are under enormous stress. Vandrey said the normalization of the high school to college pipeline, and a lack of economics education, are leading to regrettable student loan decisions. If you're interested in talking with the Press Herald about your experiences with student loan default, please email rboard@ Copy the Story Link
Yahoo
30-04-2025
- Business
- Yahoo
Federal student loans in default will be sent to collections next week. Here's what to know
The Trump administration will end the last piece of pandemic-era student loan relief and send defaulted student loans to collections starting May 5. This comes after President Donald Trump paused student loan repayment due to the COVID-19 pandemic in March 2020. President Joe Biden went on to extend this relief, and student loan repayments didn't resume until October 2023. Even then, borrowers still weren't penalized for late payments until last fall. Now, the estimated 5 million people with federal student loans in default could see their wages garnished and their federal payments reduced as their loans are sent to collections. Here's what you need to know about your defaulted student loans: Defaulted student loans begin with delinquency, which happens when you miss a payment. After 90 days, this is reported to national credit bureaus, impacting your credit score. Your loans will go into default if you haven't made a payment in 270 days and haven't made an agreement with your borrower, such as deferment or forbearance. You can log into your federal student loan account to check the status of your loans. The Education Department will begin forced recollections on May 5. That means the agency can garnish portions of your wages to pay the loans without a court order. Your credit score could also suffer, impacting your ability to obtain new loans or rent an apartment. Officials could also withhold any tax refunds or other federal payments to put towards your loan payment. This could also mean withholding up to 15 percent of your monthly Social Security retirement and disability benefits. If your loans are in default, the Federal Student Aid office will reach out in the coming weeks with information about the Default Resolution Group. The office can help you navigate your defaulted student loans. One option is to pay your loans off in full right away — but that isn't feasible for most of the 5 million people in default. The two main options are rehabilitating your loans and consolidating your loans, according to the Federal Student Aid office. Rehabilitating your loan means that you agree in writing to make nine reasonable monthly payments, which are determined by the loan holder, within 20 days of the due date. You must also make all nine payments over 10 consecutive months. Depending on your income, your monthly payment under a rehabilitation plan could be as low as $5. Consolidating your loan allows you to pay off one or multiple federal student loans with a new consolidation loan. To consolidate, you can agree to repay the new loan under an income-driven repayment plan. Alternatively, you can make three consecutive, voluntary, on-time and full monthly payments on the defaulted loan before you consolidate it. You can learn more about reconciliation and consolidation from the Federal Student Aid office. Your loan may be eligible for deferment, which means you don't have to make payments. This also means you aren't making any progress toward repaying your loan. If you're enrolled in college or a career school at least half-time, your loans are automatically in deferment. However, there are various other reasons for deferment, including cancer treatment, economic hardship, graduate fellowship completion, military service, and unemployment. Learn more about deferment from the Federal Student Aid office.
The Independent
30-04-2025
- Business
- The Independent
Federal student loans in default will be sent to collections next week. Here's what to know
The Trump administration will end the last piece of pandemic-era student loan relief and send defaulted student loans to collections starting May 5. This comes after President Donald Trump paused student loan repayment due to the COVID-19 pandemic in March 2020. President Joe Biden went on to extend this relief, and student loan repayments didn't resume until October 2023. Even then, borrowers still weren't penalized for late payments until last fall. Now, the estimated 5 million people with federal student loans in default could see their wages garnished and their federal payments reduced as their loans are sent to collections. Here's what you need to know about your defaulted student loans: How do I know if my loans are in default? Defaulted student loans begin with delinquency, which happens when you miss a payment. After 90 days, this is reported to national credit bureaus, impacting your credit score. Your loans will go into default if you haven't made a payment in 270 days and haven't made an agreement with your borrower, such as deferment or forbearance. You can log into your federal student loan account to check the status of your loans. I have loans in default. What happens now? The Education Department will begin forced recollections on May 5. That means the agency can garnish portions of your wages to pay the loans without a court order. Your credit score could also suffer, impacting your ability to obtain new loans or rent an apartment. Officials could also withhold any tax refunds or other federal payments to put towards your loan payment. This could also mean withholding up to 15 percent of your monthly Social Security retirement and disability benefits. If your loans are in default, the Federal Student Aid office will reach out in the coming weeks with information about the Default Resolution Group. The office can help you navigate your defaulted student loans. How do I get out of default? One option is to pay your loans off in full right away — but that isn't feasible for most of the 5 million people in default. The two main options are rehabilitating your loans and consolidating your loans, according to the Federal Student Aid office. Rehabilitating your loan means that you agree in writing to make nine reasonable monthly payments, which are determined by the loan holder, within 20 days of the due date. You must also make all nine payments over 10 consecutive months. Depending on your income, your monthly payment under a rehabilitation plan could be as low as $5. Consolidating your loan allows you to pay off one or multiple federal student loans with a new consolidation loan. To consolidate, you can agree to repay the new loan under an income-driven repayment plan. Alternatively, you can make three consecutive, voluntary, on-time and full monthly payments on the defaulted loan before you consolidate it. You can learn more about reconciliation and consolidation from the Federal Student Aid office. What is loan deferment? Your loan may be eligible for deferment, which means you don't have to make payments. This also means you aren't making any progress toward repaying your loan. If you're enrolled in college or a career school at least half-time, your loans are automatically in deferment. However, there are various other reasons for deferment, including cancer treatment, economic hardship, graduate fellowship completion, military service, and unemployment.
Yahoo
23-04-2025
- Business
- Yahoo
Federal government resumes collection on student debt. What you should know
The U.S. Department of Education announced Monday that federal student loan borrowers who have been safe from defaulting on their loans since 2020 must start paying again soon. US Secretary of Education Linda McMahon said the federal government will resume involuntary collections for borrowers in default on May 5. 'American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,' McMahon said Monday. Starting May 5, after a five-year reprieve, the federal government will begin the process of garnishing the paychecks of borrowers who haven't made payments on their loans for more than 270 days, or around nine months, according to USA Today. This announcement also comes just weeks after about half of the staff at the Department of Education was laid off or took buyouts, with the largest hit sector of the department being the Federal Student Aid office. Former President Joe Biden's administration pushed off collections until after the 2024 presidential election, and attempted to forgive student loan debts that lasted over 10 years and provide more generous income-based repayment plans under his SAVE plan, but it has been tied up in courts for months. McMahon accused the Biden administration of misleading borrowers, saying the Executive Branch doesn't have the authority to wipe away debt. More higher ed news: ACLU adds two students in its lawsuit against DHS claiming student visas wrongfully revoked Student borrowers have always been able to make payments anytime within the last five years, but collections were pushed off by the Biden administration until after the 2024 presidential election. Now, the Department of Education says it will begin sending out email communications over in coming days to alert them of collections restarting May 5. The department is recommending that anyone in default contact the Default Resolution Group to start making plans for monthly payments, enroll in an income-driven repayment plan or sign up for loan rehabilitation. Bill Wozniak, vice president of INvestED, said borrowers should start now on assessing where they are with their loan status. 'We want to make sure everybody's on high alert for any messaging about what status they are in, what options are available to them and then work on what options are best for them,' Wozniak told Indystar. INvestEd is an Indiana organization that helps students prepare for education after high school and figure out student loans. The Department of Education said in its news release that resuming collections might mean tax refunds, social security benefits and wages could be garnished. If wages will be garnished, notices will be sent this summer, the department said. More school news: Here are the top 10 public schools in Indiana, according to To avoid wage garnishment, Wozniak recommends borrowers investigate options that best fit their budget. The Federal Student Aid office's loan calculator could be a useful tool on that front, Wozniak said. Consequences for continuing to default on your loans could also result in damage to your credit score, not being able to purchase a home and possibly being taken to court, according to the Federal Student Aid office. The federal government estimates that more than five million borrowers have defaulted on their loans since required payments were put on pause in March 2020. The Biden administration resumed monthly student loan bills in the fall of 2023, but deferred involuntary collections. Just over a third of borrowers (38%) are current on their student loans, according to the Education Department. More than 40 million Americans still owe on their federal student loans. Keep up with school news: Sign up for Study Hall, IndyStar's free weekly education newsletter. Borrowers should first check the status of their federal loans by going to Those who have questions on how to figure out starting repayments again can reach out to INvestED at 317-715-9007, or their hotline specifically for student loan help at 317-715-9015. INvestED also hosts various events across the state for incoming college students to help with applying for the FAFSA or student loan questions. USA TODAY education reporter Zachary Schermele contributed to this story. Contact IndyStar K-12 education reporter Caroline Beck at 317-618-5807 or CBeck@ Follow her on Twitter (X): @CarolineB_Indy. This article originally appeared on Indianapolis Star: Defaulted student loan collection is restarting. What to know
