US restarts student loan collections: 10 things you need to know

The US Department of Education has announced that, as of Monday 5 May 2025, it will resume all collections activities on defaulted federal student loans, the first time since March 2020 that borrowers in default will face involuntary repayment measures.

The pause on collections, implemented at the outset of the Covid-19 pandemic and upheld by the Biden administration until October 2023 for general repayments, had left millions of borrowers in limbo, with little clarity on how to return to good standing.

Now, amid record-high delinquency rates and more than $1.6 trillion in outstanding debt, the Department says it is renewing its efforts both to protect taxpayers and to guide borrowers back into manageable repayment schedules.
Education Secretary Linda McMahon framed the move as a restoration of fairness: “American taxpayers will no longer be forced to serve as collateral for irresponsible student-loan policies,” she said. The Department has paired the restart of collections with a comprehensive communications and outreach campaign, promising clearer guidance on income-driven repayment plans, loan rehabilitation and a new, streamlined set of online tools. At the same time, guaranty agencies will be authorised to begin involuntary collections on Federal Family Education Loan (FFEL) Programme loans, and the Treasury Offset Programme will once more divert tax refunds and federal salary payments to cover unpaid balances.

Financial-hardship advocates warn that the resumption of collections could impose significant strain on households already stretched by inflation and rising living costs. Credit-bureau data show that roughly one in five borrowers is “seriously delinquent” 90 days or more past due and that default can cost an average credit-score loss of 63 points, rising to 175 points for those previously deemed “super-prime”.

As borrowers face wage garnishment, tax-refund seizures and the threat of Social Security offsets, many will need to act swiftly to avoid long-term damage to their financial health.

Here are the 10 things you should know

1. When did collections resume?
Collections on defaulted federal student loans restarted on Monday May 5. Borrowers in default should already have received emails from the Office of Federal Student Aid (FSA) notifying them of these changes.
2. What happens if I’m in default?
If you remain in default, the Treasury Offset Programme can withhold your federal tax refunds and up to 15% of your disposable federal salary or benefit payments (including Social Security).
3. Can I avoid collections by enrolling in a repayment plan?
Yes. You may contact the Default Resolution Group to make monthly payments, sign up for loan rehabilitation (making a set number of payments to erase default status), or enrol in an income-driven repayment (IDR) plan.
4. How do I apply for an income-driven repayment plan?
The Department says it will begin processing IDR plan applications (including Income-Based Repayment, Income-Contingent Repayment and PAYE) next month. A simplified online IDR process will eliminate annual income recertification.
5. What support tools are available?
FSA has launched a new Loan Simulator, an AI Assistant (“Aiden”), extended servicer call times and enhanced online resources at StudentAid.gov to help you select and enrol in the best plan for your circumstances.
6. Will there be any more loan-forgiveness programmes?
The Department has stated explicitly that there will be no further mass loan-forgiveness schemes. Any future relief will be targeted, not universal.
7. Why is the Department restarting collections now?
According to Secretary McMahon, resuming collections protects US taxpayers—who finance federal student loans—from shouldering unpaid balances, and encourages borrowers to restore their credit and financial stability.
8. What is the current state of student-loan debt?
Around 42.7 million borrowers owe more than $1.6 trillion. Over 5 million have not made a payment for more than a year and 4 million are in late-stage delinquency (91–180 days past due).
9. How many borrowers are impacted?
Nearly 10 million borrowers could be in default within months if current trends continue — almost a quarter of the entire federal-loan portfolio.
10. Who else is involved in the outreach effort?
FSA will partner with states, institutions, financial-aid administrators, college-access organisations, servicers and other stakeholders to ensure borrowers receive clear, consistent information and support.