$1.6 trillion in student debt: Federal loan collections restart May 5 as repayment campaign begins

The US Department of Education has announced that it will resume collections on defaulted federal student loans starting May 5, 2025. This marks the first time in over four years that the department, through its Office of Federal Student Aid (FSA), will actively pursue defaulted borrowers, ending a pandemic-era pause that began in March 2020.

The restart is part of a broader effort to move the nation's $1.6 trillion student loan portfolio back into repayment and restore long-term sustainability to federal lending programs. The Department's new approach is also intended to protect taxpayers from absorbing the cost of unpaid loans, emphasizing that borrowers—not the public—are ultimately responsible for repaying debts incurred to finance their education.

A return to repayment after years of delay
While Congress had already required borrowers to begin repaying student loans in October 2023, the Biden-Harris Administration extended the collection pause, creating what federal officials now describe as a "confusing limbo" for borrowers. According to Secretary of Education Linda McMahon, this delay allowed delinquency and default rates to worsen while giving borrowers misleading impressions about potential loan forgiveness.

The Department's new policy seeks to restore clarity and accountability. "American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies," said Secretary McMahon. She noted that executive actions from the previous administration could not constitutionally cancel debt, and that hundreds of billions of dollars had already been transferred to taxpayers.

The scope of the student loan crisis
Currently, more than 42.7 million borrowers owe over $1.6 trillion in federal student debt. Of these, more than 5 million borrowers are in default, having failed to make payments for over 360 days—many for more than seven years. An additional 4 million borrowers are in late-stage delinquency, with payments overdue by 91 to 180 days. If trends continue, almost 10 million borrowers could be in default within a few months, representing nearly 25 percent of the total loan portfolio.

Only 38 percent of borrowers are currently repaying their loans on schedule. The remainder are either delinquent, in an interest-free forbearance or deferment, or in grace periods or school enrollment status. Another 1.9 million borrowers have been unable to enroll in repayment plans due to a processing freeze implemented in August 2024 under the previous administration. The Department is working with federal loan servicers and expects application processing to resume in May 2025.

Collections and borrower outreach efforts
Beginning May 5, 2025, the Department will reactivate the Treasury Offset Program in partnership with the US Department of the Treasury. This program enables the federal government to collect on defaulted loans by withholding federal tax refunds, Social Security payments, and other federal disbursements. Borrowers in default will be contacted via email over the next two weeks and encouraged to reach out to the Default Resolution Group to explore repayment options, including income-driven repayment (IDR) plans or loan rehabilitation.

Later in the summer, the Department will begin sending notices in preparation for administrative wage garnishment. Additionally, guaranty agencies will be authorized to initiate involuntary collection actions on loans issued through the Federal Family Education Loan (FFEL) Program.

All collections activity will comply with provisions outlined in the Higher Education Act, which mandates that student and parent borrowers must be given sufficient notice and opportunity to resolve their loans voluntarily before more aggressive steps are taken.

Support for struggling and current borrowers
To support borrowers during this transition, FSA will launch a nationwide communications campaign to ensure that all affected individuals are informed about their repayment responsibilities and available support resources. The campaign will utilize email, social media, and direct outreach through partners such as schools, financial aid administrators, college access organizations, and third-party servicers.

FSA will also introduce tools to help borrowers make informed decisions about repayment. These include a revamped Loan Simulator, an AI-powered assistant named Aiden, and extended hours for federal loan servicers. A new streamlined IDR process will also go live, allowing borrowers to enroll more quickly and removing the annual income recertification requirement.

The Department has made it clear: there will be no mass loan forgiveness moving forward. Its focus will instead be on restoring "commonsense and fairness" to the student loan system—ensuring that repayment resumes in a structured, lawful, and supportive manner for borrowers while safeguarding the interests of American taxpayers.