Summary:
After a five-year pause, the U.S. Department of Education has announced it will resume collections on defaulted federal student loans starting May 5, 2025. Millions of borrowers are at risk of wage garnishment, tax refund seizures, and damage to credit scores unless they take immediate action. Here’s what this means and how our firm can help.
Key Points Borrowers Must Know:
- Collections Restart May 5, 2025:
The federal government will begin involuntary collections, including wage garnishments and Treasury offsets, on defaulted student loans beginning May 5. This marks the first resumption of collections since March 2020. - Who Is Affected Most:
This primarily impacts the 9 million borrowers who are either in default or late-stage delinquency (91–180 days past due). These individuals face the most urgent risk of involuntary collection actions. - Borrowers Will Be Notified:
The Department of Education will email affected borrowers over the next two weeks. Later this summer, notices of administrative wage garnishment will follow. - No More Mass Forgiveness:
The Department has made clear: there will be no broad loan forgiveness. Supreme Court rulings and policy shifts have halted plans like Biden’s SAVE plan and the $20,000 forgiveness initiative. - What Happens If You Don’t Act:
If borrowers fail to respond, they may experience automatic paycheck deductions, seizure of tax refunds, and damage to their credit — potentially affecting housing, car purchases, and more. - Rehabilitation and Income-Driven Options Are Available:
Borrowers can avoid collections by:- Rehabilitating their loan (make 9 voluntary payments to exit default)
- Consolidating their loans
- Enrolling in Income-Driven Repayment (IDR) plans like PAYE or IBR
- Using tools like the Loan Simulator and new AI assistant Aiden to explore options at StudentAid.gov/end-default
- Processing Delays Still Exist:
As of April, the Department still has not resumed processing IDR applications submitted since August 2024. Processing is expected to begin again next month — but borrowers should act now to prepare. - Impact on Borrowers and the Economy:
Experts warn that many borrowers have been out of the repayment habit for nearly five years. Sudden re-entry may destabilize budgets, and missed payments could send credit scores plummeting — especially harmful for those already in financial hardship. - Legal Support Can Help:
Borrowers overwhelmed by collections, garnishments, or unaffordable payments may qualify for bankruptcy protections, especially under Chapter 13 plans that can restructure or even discharge certain student loans under new legal standards. - We’re Here to Help:
Our firm understands the evolving legal and financial landscape for student loan borrowers. Whether you’re facing default, harassment by collectors, or need relief through bankruptcy, we can help you explore your options and protect your financial future.
Final Thoughts:
Student loan collections are back — and they’re not waiting.
If you’re struggling with federal student loan debt, now is the time to act. Contact our office to speak with an attorney who understands the intersection of student loan collections and bankruptcy protections. Don’t wait for garnishments or offsets — let’s get ahead of the crisis together.
This post is for informational purposes only and does not constitute legal advice. For personalized assistance, consult a licensed bankruptcy attorney.
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