Defaulted Student Loan Payments Will Restart Soon. Here’s What to Know 

The Department of Education announced Monday that it will resume collection on defaulted student loans starting Monday, May 5. 

Student loan borrowers who defaulted on their loans had not made payments towards their balances since March 2020, when the COVID-19 pandemic paused such collection efforts. But borrowers should not expect to receive any exemptions from payments under the new Trump Administration, which estimates that some 10 million, or 1 in 4 borrowers, could be in default on their loans in the next few months. 

The act marks a policy shift from the Biden Administration, whose efforts to grant student loan forgiveness were struck down in the courts time and time again. Most recently, lawsuits targeted the Saving on a Valuable Education (SAVE) income-driven repayment plan, through which some low-income borrowers made $0 monthly payments towards their student loans. 

The federal government’s student loan portfolio has amassed to some $1.6 trillion, and currently 40% of borrowers are in repayment, White House Press Secretary Karoline Leavitt told reporters on Tuesday. “America is $36 trillion in debt. We must get our fiscal house in order and restore common sense to our country. If you take out a loan, you have to pay it back,” she said.

Under the new Administration, student loans are controlled by both the Education Department and the Department of Treasury. Here’s what to know. 

What happens next? 

Borrowers have been in limbo over the last few months amid litigation pausing the SAVE plan, a highly popular repayment program that was touted as the “most affordable” option for many. Borrowers enrolled in SAVE may have to find a new home for their loans, and should apply for other repayment programs, if they have not already. The Department of Education anticipates that they will begin to process applications for these other plans in the next month.  

Meanwhile, borrowers who have their loans in default should expect to receive an email in the next two weeks asking them to contact the Debt Resolution Group, which helps resolve disputes related to defaulted loans.

The Trump Administration will not pursue any efforts to grant student loan forgiveness, so borrowers should not wait.  

What happens if I don’t pay my student loans? 

The Administration has clearly stated that failure to make payments on student loan balances could lead to the garnishment of wages, social security, or tax refunds. 

Later this summer, the Office of Federal Student Aid (FSA) will send notices to start the wage garnishment process, the Department of Education said. 

Borrowers will also see impacts to their credit scores should they fail to make payments. 

“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” said U.S. Secretary of Education Linda McMahon in a press release. “Going forward, the Department of Education, in conjunction with the Department of Treasury, will shepherd the student loan program responsibly and according to the law, which means helping borrowers return to repayment—both for the sake of their own financial health and our nation’s economic outlook.”