The Department of Education announced it will resume sending any student loan that is in default to collections. Here’s what you should do now.
Once upon a time in happier times, the administration was focused on trying to give student loan borrowers relief from onerous payments for higher education that did not really pay for itself.
There were new, income-driven payment plans designed to match your income. This made a lot of sense; paying less if you earn less felt like an equitable solution.
When the pandemic hit, the Department of Education paused everything, including the need to pay back student loans. This also made sense, as when people were being laid off, asking them to pay back loans would be silly.
Slowly, things have been returning to normal. Student loan payments resumed as of October 1, 2024, at least for those who aren’t marooned on the SAVE plan (which is a whole different story).
Along with payments, the enforcement side of things is set to kick in too. The Department of Education announced that it will resume collections on student loans in default on May 5, 2025.
How does this affect you? Read on to find out.
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What’s happening with student loans?
If you are in default with your student loans, your loans are going to be referred to collections starting May 5th, 2025.
Being in default is defined as not having made payments on your student loans for 270 days (nine months).
Now, the tricky thing here is that payments have only been due since October 2024, which isn’t nine months ago. So what gives?
As far as I can tell, this means that if you were in default before the pandemic paused payments, and you haven’t made a payment since, only then you will be in default.
If you were current in 2020, but haven’t restarted payments yet, you’re not in default. Yet.
If you stopped paying in the pandemic
Millions of people stopped paying their student loans during the pandemic and haven’t restarted paying them.
This new ruling will be coming for you in a few months.
Since payments restarted in October 2024, nine months from then is July 2025. So if you haven’t started paying your student loans back by July 2025, you will likely be in default and your loans will be referred to collections.
What does student loan collections mean?
When your loans are in default and referred to collections, this means that the government is authorized to collect money from you in other, non-consensual means. This can include things like wage garnishment, taking money out of your paycheck, or reducing your tax refund if you get one.
Chillingly, this quote from the Department of Education states that if you go into default, your entire balance becomes immediately due:
If you default on your federal student loan, the entire balance of the loan (principal and interest) becomes immediately due. This is called acceleration. Once your loan is accelerated, your loan holder can begin collecting on your loan by taking money from your wages or your federal payments (such as tax refunds).
What you need to do now
First, if you’re not sure what student loans you have, you can find out by going to studentaid.gov and selecting “View Your Loans”. Log in, and you’ll see any loans the Department of Education is aware of.
If you’re not in default, make a payment on all the loans that are delinquent. This may not get you current, but it may increase the likelihood that you won’t go into default. This is a stalling measure only.
If you can’t get current on your past due loans, then contact your loan servicer to see if you can get on a payment plan to bring you current. Find the phone number associated with your loans (either on a billing statement or by logging in to studentaid.gov) and just call. They will help you and be more likely to advocate for you if they see effort on your side.
And finally, if you go into default, same thing goes: call your servicer and work out a plan, either through loan consolidation (making a new loan out of old ones) or other loan rehabilitation.
My take on these changes
I don’t love how student loan collections are happening. I think we have larger issues to deal with than forcing millions of people into wage garnishment.
That said, if we’re not going to forgive student loans, then it seems like we need to have a process for requiring that they be paid back. Let’s do one or do the other.
I don’t like that there’s an undertone of contempt in the public comments around these changes though. Like this:
“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” U.S. Secretary of Education Linda McMahon said in a statement.
Oh, give me a break. No one is serving as collateral here. Whether taxpayers “pay” for student loan forgiveness is an accounting question. You could defund the Pentagon or some other part of the government and come up with the money, and this would have nothing to do with taxpayers. DOGE could be helping to fund student loan forgiveness if they wanted.
I know many people are stuck in the mindset of “I paid my student loans back, so why shouldn’t you?“. But that’s a false equivalence. Tuition has vastly outpaced inflation and wages for many years, and the benefits of this tuition have not always borne out. It’s no different than a Boomer decrying kids these days for not buying a house at age 23 for $40,000 from working in the Ford factory. The economics are different today.
At the end of day, while we should advocate for better financial situations that reflect changing economic conditions, in the meantime we have to pay what we owe. Or at least start.
But if you can, get on an income-driven repayment plan. (Learn more here.) You’ll pay a lot less now. And it’s not crazy to think that loan forgiveness might be a possibility again one day, despite what the Department of Education is saying today. A lot is different from a few years ago, so a lot could be different a few years from now.
