Millions of Borrowers Face Renewed Penalties as Trump Administration Shifts Student Loan Oversight
The U.S. Department of Education announced on Monday that it will officially resume collections on federal student loans in default starting May 5, ending a pause that has been in place since the early days of the COVID-19 pandemic nearly five years ago.
More than 5 million borrowers currently have federal loans in default, which the department defines as accounts that have been unpaid for at least 270 days. With collections set to restart, the Office of Federal Student Aid will also reinstate the Treasury Offset Program, which allows the government to seize federal and state payments—including tax refunds and Social Security benefits—to recover delinquent debt.
In a statement, Education Secretary Linda McMahon took aim at previous debt relief initiatives. “American taxpayers will no longer be used as collateral for reckless student loan schemes,” she said. “The Biden Administration misled borrowers—only Congress has the power to cancel debt, and outstanding balances don’t simply vanish.”
To avoid aggressive penalties, defaulted borrowers are encouraged to contact the Default Resolution Group to explore pathways such as loan rehabilitation, income-driven repayment plans, or affordable monthly payment arrangements. The department also plans to roll out administrative wage garnishment this summer, which allows the federal government to order employers to withhold a portion of an employee’s paycheck to recover unpaid student loans.
This development comes amid a broader shift in federal education policy. In a controversial move last month, President Donald Trump signed an executive order directing Secretary McMahon to begin the process of dissolving the U.S. Department of Education entirely. Under the directive, the Small Business Administration (SBA) will assume control of the nation’s $1.8 trillion federal student loan portfolio, as previously reported by CNN.
The resumption of collections signals a dramatic policy pivot that could have major implications for millions of Americans, especially those still recovering from pandemic-era financial setbacks. As the political debate around student debt continues to intensify, borrowers now face a new wave of enforcement—and an uncertain future under a rapidly changing system.
