President Donald Trump’s administration is resuming collections on defaulted student-loan borrowers for the first time in five years.
On Monday, the Department of Education announced that it will put defaulted borrowers back into repayment on May 5.
“Borrowers who don’t make payments on time will see their credit scores go down, and in some cases their wages automatically garnished,” Education Secretary Linda McMahon wrote in an opinion piece alongside the announcement.
The department has not collected on defaulted student loans since March 2020, as one of the relief measures put in place at the onset of the pandemic. Starting in May, the Federal Student Aid office will restart the Treasury Offset Program, which withholds government benefits, including Social Security and tax refunds, from people with past-due payments. After 30 days, the Treasury Department would start garnishing wages for defaulted borrowers.
The department’s press release said that FSA will contact defaulted borrowers over the next two weeks to urge them to make plans to restart payments.
“If you are a student borrower with a federal loan balance and haven’t been making payments, you must restart payments now,” McMahon said. “Our Federal Student Aid office is providing every form of assistance we legally can to ensure that a monthly payment can fit into your budget.”
Over 5 million student-loan borrowers are in default, or more than 270 days past due. The New York Federal Reserve recently estimated that over 9 million borrowers are behind on their bills, but not yet in default, after pandemic-era protections expired.
Some Democratic lawmakers have previously raised the alarm on the consequences of defaulting for student-loan borrowers. Last year, Sen. Elizabeth Warren led a group of her colleagues in urging the Biden administration to end the practice of withholding Social Security benefits for defaulted borrowers.
It’s a “particularly devastating practice for seniors and people with disabilities who rely on Social Security as their sole source of income,” the lawmakers said.
Trump’s Education Department recommended that borrowers in default contact the Default Resolution Group to make a monthly payment or enroll in an income-driven repayment plan.
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