Student Loan Collections Resume May 5: Millions at Risk as Federal Default Program Restarts
After a five-year pause, the Trump administration is restarting collections on defaulted federal student loans—a move that could affect millions of borrowers across the country.
Starting May 5, the Department of Education’s Federal Student Aid office will resume collection efforts, which include garnishing wages, seizing tax refunds, and deducting from Social Security benefits for borrowers in default.
“Borrowers and taxpayers alike will benefit from these actions as they collectively bring the federal student loan portfolio back into repayment,” said Education Secretary Linda McMahon.
Who’s Impacted?
According to the department, 5.3 million borrowers were in default on their federal loans before the pandemic. Default status kicks in after 270 days of missed payments.
Millions more are at risk:
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2.9 million are already 61–90 days delinquent.
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4 million are in “late-stage delinquency,” having been reported to credit bureaus and nearing default.
“This isn’t just about today’s borrowers—it’s about the 5 million who could be at risk of defaulting in the next five months,” said Scott Buchanan, head of the Student Loan Servicing Alliance. “Action now is critical.”
What’s Changing?
During the pandemic, student loan collections were frozen. In March 2020, under President Trump, the federal government suspended all collections, including wage garnishments and benefit seizures.
Though the Biden administration extended the payment pause several times through October 2023, it never resumed collections—until now.
“This restart was always coming,” said Betsy Mayotte, president of The Institute of Student Loan Advisors (TISLA). “The government has a legal obligation to collect on these debts—they’re owed to U.S. taxpayers.”
Many borrowers mistakenly believed their debt was forgiven or had expired. Mayotte warns: federal student loans have no statute of limitations.
“This isn’t a new policy. It’s just the return of one that’s been on hold,” she added.
What Borrowers Should Expect
This summer, the Department of Education will begin issuing wage garnishment notices, which could deduct up to 15% of a borrower’s disposable income. Officials are urging anyone in default to explore income-driven repayment (IDR) plans or begin making payments immediately.
Borrowers will receive outreach via email, mail, and social media before May 5. You can check your loan status at StudentAid.gov.
“If you’re getting bills from a loan servicer like MOHELA or Aidvantage, that means you’re not in default,” said Mike Pierce, executive director of the Student Borrower Protection Center. “But if you’re not, and you’re behind, now’s the time to act.”
Your Options if You’re in Default
There are three ways to get out of default:
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Paying in Full
Fast, but unrealistic for most people. -
Loan Consolidation
Combines defaulted loans into a new one. It’s quick but leaves the default on your credit report. -
Loan Rehabilitation
Make 9 on-time, income-based monthly payments. If completed successfully, the default is removed from your credit report.
However, the situation is further complicated by ongoing legal challenges to President Biden’s SAVE plan, which determines IDR payments based on income. If courts strike it down, millions could face unaffordable payments just as collections resume.
“The timing couldn’t be worse,” Pierce said. “People are being told to repay without a clear roadmap and could end up losing wages or Social Security.”
A Shrinking Safety Net
The Department of Education is facing major budget cuts and layoffs under the Trump administration. Management of the student loan system will reportedly shift to the Small Business Administration, which itself is facing over a 40% workforce reduction.
This comes at a time when inflation and rising prices are already making it harder for families to make ends meet.
“It’s terrifying,” Pierce said. “Families will see checks shrink or disappear entirely while trying to keep up with daily expenses.”
Need Help?
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Visit StudentAid.gov to check your status.
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Contact your loan servicer.
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Explore options for IDR, consolidation, or rehabilitation before May 5.
Layoffs and Overwhelmed Loan Servicers Add to Borrowers’ Struggles
As loan collections ramp up, many borrowers may find it even harder to manage their student debt due to staffing cuts and overwhelmed call centers.
“The layoffs affected a lot of what I call ‘the helpers,’” said Betsy Mayotte, president of the Institute of Student Loan Advisors. “Loan servicers are also extremely overburdened by everything else that is happening. So when borrowers reach out for support, they’re often met with long hold times or delayed responses.”
Despite the challenges, Mayotte urges borrowers not to give up. Reliable resources still exist, including nonprofit organizations, state ombudsmen, and trustworthy online guides.
How to Take Action Now
Scott Buchanan of the Student Loan Servicing Alliance recommends borrowers start by using the loan calculator on StudentAid.gov. This tool helps estimate monthly payments under different plans, including income-driven repayment (IDR) options.
“Once you’ve got a ballpark figure, go to your servicer’s online portal to crunch the real numbers and lock in a plan that works for you,” Buchanan said.
He also emphasized that borrowers facing job loss, economic hardship, or other financial strain can request deferments or forbearance—tools designed to temporarily reduce or pause payments.
“The most important thing people need to realize is that the federal student loan system is incredibly flexible—probably the most flexible loan program that exists,” Buchanan said. “So use that flexibility. It’s a government benefit—take advantage of it.”
