Student Loan Crackdown Returns

After a five-year pause, the U.S. Department of Education will resume collections on defaulted federal student loans starting May 5. This marks the final phase of the Biden administration’s effort to restart the federal student loan system, with general repayments already underway. Borrowers in default—currently around 5.3 million—face serious consequences, including tax refund seizures, wage garnishment, and Social Security offsets. Officials and experts are urging borrowers to act now by exploring options like loan rehabilitation or consolidation to avoid these penalties. Scott Buchanan of the Student Loan Servicing Alliance emphasized the urgency, encouraging borrowers to engage with their servicers immediately.

Default can have long-lasting financial impacts, from damaged credit scores to ineligibility for federal aid and income-driven repayment plans. Experts like Betsy Mayotte warn that older, low-income borrowers may be especially vulnerable to these renewed collection efforts. She urges individuals not to delay in addressing their loan status, noting that resolving default starts with reaching out. Borrowers can visit studentaid.gov for more information or wait for outreach from the Federal Student Aid office. While consolidation offers a quicker path out of default, only rehabilitation can remove the default from a credit report—though neither option erases previous delinquencies.