The Trump administration is turning on some of the harshest consequences for falling behind on student loans.
Starting on May 5, the government is restarting debt collection on defaulted student loans. As part of these efforts, the Department of Education is restarting the process that allows for borrowers who are in default on their student loans to have their Social Security benefits and tax refunds offset to repay the debt, the U.S. Education Department announced Monday. Early this summer, the government will also begin garnishing wages to repay defaulted student loans.
This will mark the first time in five years — since the collections system was paused as part of the pandemic-era freeze on student-loan payments — that borrowers have faced these consequences for defaulting on student loans (defined as not making a payment on the debt in more than 270 days).
The announcement comes amid data indicating a significant portion of student-loan borrowers are struggling to make payments on their debt. Nearly 10 million borrowers are at risk of experiencing a credit-score drop, according to the Federal Reserve Bank of New York.
In previewing the announcement for reporters, a senior Education Department official said that this dynamic could put the health of the student-loan portfolio at risk, adding that it is “headed toward a fiscal cliff if we don’t start collections.”
