The U.S. Department of Education has announced it will resume collections on defaulted federal student loan collections beginning May 5, 2025. This marks the first time since March 2020 that the agency will restart this process, which was paused during the onset of the COVID-19 pandemic under the first Trump administration. According to a senior official from the department, the extended halt in collections has led to significant concern over the health of the federal student loan portfolio, with fears it is now approaching a “fiscal cliff.”
Officials noted that student loan collections has continued to balloon in the absence of collection efforts. A large number of borrowers are now in various stages of delinquency or default. The official revealed that only 40% of borrowers are current on their payments, while the remaining 60% have fallen behind. Among them, four million borrowers are currently in late-stage delinquency, meaning they are 91 to 180 days overdue on payments.
Reiterating the administration’s stance, the department official stated, “Student loan debt must be paid back. American taxpayers can no longer serve as collateral for unpaid student loans.”
Government Launches Student Loan Collections Strategy and Outreach
To facilitate the resumption of collections, the Education Department will partner with the Treasury Offset Program, a mechanism that recovers overdue federal debts through tax refund offsets and wage garnishment. The collections policy will be reinstated starting May 5, aiming to curb the mounting delinquency rates and reinforce repayment discipline.
In parallel, the department plans to roll out a comprehensive communication campaign targeted at defaulted borrowers. This initiative will notify borrowers of their loan status and encourage them to sign up for automatic debit to prevent future delinquency. The department hopes that more proactive engagement will help reduce the number of borrowers falling behind on payments.
The return to collections is part of broader changes proposed under President Donald Trump’s administration, which has emphasized restructuring the Department of Education to minimize federal influence in educational funding and policy. While the department’s overall role is being reassessed, services such as Pell Grants, student loan management, and support for individuals with special needs are expected to continue under other federal agencies.
Legislative Efforts to Address Loan Burdens and Education Costs
Alongside the resumption of collections, the Education Department is looking to Congress for long-term solutions to rising college costs and repayment challenges. A senior official emphasized the need for systemic reform, stating, “Congress has a role to play in fixing the higher education system so students are not burdened with unmanageable debt.”
Bipartisan legislative proposals are already in motion. Notably, the Employer Participation Repayment Act, reintroduced by Senators John Thune (R-S.D.) and Mark Warner (D-Va.), seeks to make permanent a benefit allowing employers to contribute up to $5,250 tax-free toward employees’ student loan repayment—a provision currently set to expire in 2026. Companion legislation has also been introduced in the House by Reps. Nicole Malliotakis (R-N.Y.) and Scott Peters (D-Calif.).
As of now, nearly 43 million Americans hold a combined $1.6 trillion in federal student loan debt. With collections restarting and reforms on the table, the administration is signaling a strong shift toward fiscal responsibility while urging collaboration with lawmakers to make higher education more affordable and sustainable
Also Read :- Potentially ‘disruptive’ Shutdown For The Education Department
