Federal Government to start debt collection on up to 5.3 million borrowers

The U.S. Department of Education will restart collection efforts on defaulted federal student loans in early May, ending a years-long hiatus that began at the height of the coronavirus pandemic. The move could impact millions of Americans who have fallen behind on their payments.

The collections, which will begin May 5, will be carried out through the Treasury Department’s offset program. That mechanism allows the government to withhold federal payments such as tax refunds and Social Security benefits from borrowers who have failed to repay their loans. Wage garnishment will also resume after a 30-day warning period, officials confirmed Monday.

Approximately 5.3 million people are currently in default on their federal student debt, with an additional 4 million borrowers more than three months behind on payments. Under federal rules, loans enter default after 270 days of nonpayment, potentially triggering severe financial consequences such as damaged credit scores and aggressive collections.

The announcement represents a significant shift in federal student loan policy. No loans have been sent to collections since March 2020, when President Donald J. Trump ordered a freeze on payments and interest as a temporary measure to aid borrowers during the pandemic. The Biden administration extended the moratorium multiple times, finally allowing it to expire in October 2024.

“This is cruel, unnecessary and will further fan the flames of economic chaos for working families across this country,” said Mike Pierce, the executive director of the Student Borrower Protection Center, a nonprofit advocacy group.

The resumption of collections marks a broader pivot in federal approach following a period of ambitious — and frequently thwarted — efforts to cancel student debt. President Biden sought sweeping forgiveness for millions of borrowers, but his most ambitious plan was struck down by the Supreme Court. Nonetheless, his administration has still managed to erase over $183 billion in student debt through targeted relief programs, aiding more than 5 million Americans.

In a statement on Monday, Education Secretary Linda McMahon defended the department’s decision, characterizing the return to collections as a necessary course correction.

“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” McMahon said. “Going forward, the Department of Education, in conjunction with the Department of Treasury, will shepherd the student loan program responsibly and according to the law, which means helping borrowers return to repayment — both for the sake of their own financial health and our nation’s economic outlook.”

Borrowers still have options to avoid the harshest penalties. One path out of default is loan rehabilitation — a process that requires nine consecutive on-time payments based on income and expenses. Betsy Mayotte, president of The Institute for Student Loan Advisors, noted that rehabilitation is a one-time opportunity, but for many, it offers a path back into good standing.

Loan servicers can guide borrowers through the rehabilitation process, but time is of the essence.

The broader landscape of student debt remains fraught. Federal data shows fewer than four in ten borrowers are current on their obligations, underscoring the lingering aftershocks of the payment pause and the continued financial strain on many households.

As the government reactivates its collection apparatus, the tension between borrower relief and fiscal responsibility will likely remain a defining issue heading into the 2026 elections.