Individuals with student loans in the United States should be attentive as the Education Department has announced an update that will soon affect about 5.3 million people, beginning as early as next month.
The announcement came from the department on Monday (April 21), following the suspension of federal student loan repayments during Trump’s presidency due to the Covid-19 pandemic.
During this period, federal loans were not sent for collection, and former President Joe Biden attempted several times to implement loan forgiveness while in office.
Under Biden’s administration, student loans were canceled for over 5 million borrowers. However, his wider initiative for loan forgiveness faced legal challenges, and in 2023, the US Supreme Court declared the plan unconstitutional since it lacked congressional approval.
Consequently, around 5.3 million borrowers remain in default on their federal student loans. The Education Department has indicated that this figure could escalate to 10 million within a few months.
Repayments, labeled as ‘involuntary,’ are scheduled to commence again, with affected individuals receiving notifications in the coming two weeks.
According to the US Department of Education’s statement, “Beginning May 5, the department will initiate involuntary collection via the Treasury Department’s offset program, which deducts payments from government disbursements—such as tax refunds, federal salaries, and other benefits—from individuals with overdue debts to the government.”
The department also mentioned that wages would be garnished from those with defaulted loans, following a 30-day notice period.
Loans enter default status when borrowers fail to make payments for nine months, resulting in reports on their credit scores and potential collections actions.
Department officials report that, in addition to those in default, another 4 million borrowers are 91 to 180 days overdue on their payments. Fewer than 40 percent of borrowers are current on their student loans, according to the officials.
Regarding the resumption of payments, Education Secretary Linda McMahon stated: “American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies.”
“The Biden Administration misled borrowers: the executive branch does not have the constitutional authority to wipe debt away, nor do the loan balances simply disappear,” she noted.
McMahon further added, “Going forward, the Department of Education, in conjunction with the Department of Treasury, will manage the student loan program responsibly and in accordance with the law, which means aiding borrowers in returning to repayment — both for their financial health and the nation’s economic outlook.”