The federal government on Monday will resume collecting defaulted student loan payments from millions of people for the first time since the start of the pandemic, officials said.<\/p>\n\n\n\n
The Trump administration said it would collect the debt through a Treasury Department program that withholds payments through tax refunds, wages and government benefits.<\/p>\n\n\n\n
The U.S. Education Department has not collected on defaulted loans since March 2020. Of the nearly 43 million people who owe money, only a little more than a third have made regular payments, the agency said.<\/p>\n\n\n\n
In the last five years, student debt has grown to $1.6 trillion, officials said. Education Secretary Linda McMahon said taxpayers would now be saved from shouldering that cost.<\/p>\n\n\n\n
\u201cAmerican taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,\u201d McMahon said in an April 21 news release announcing the restart of collections<\/a>.<\/p>\n\n\n\n The move comes after years of legal back-and-forth about loan forgiveness and at a time when advocates say student borrowers are stretched thin from inflation and growing concerns over the cost of living.<\/p>\n\n\n\n \u201cWe\u2019re in the worst student loan landscape that we\u2019ve ever been before,\u201d said Sabrina Calazans, executive director of the Student Debt Crisis Center, a nonprofit that advocates for student debt cancellation.<\/p>\n\n\n\n \u201cThe plans and proposals being put forth by the Trump administration are going to harm millions of individuals and families,\u201d Calazans added. \u201cIt\u2019s going to create a financial catastrophe where folks will not be able to meet their basic needs.\u201d<\/p>\n\n\n\n All borrowers in default should have received an email from the Office of Federal Student Aid alerting them to the changes.<\/p>\n\n\n\n Officials said the email urges borrowers to contact the Default Resolution Group<\/a> to either make a monthly payment, enroll in an income-based repayment plan or sign up for loan rehabilitation<\/a> \u2014 a process that can erase a default status if the borrower makes a set of payments during a specific time frame, depending on the type of loan.<\/p>\n\n\n\n To schedule monthly payments, borrowers who have not changed their marital status or income would have needed to send their most recent Federal 1040 tax return to the Education Department, according to instructions outlined on the Default Resolution Group\u2019s website.<\/p>\n\n\n\n The Education Department said it will be using the Treasury Department\u2019s Offset Program to collect on the debt by withholding payments through tax refunds, salaries and benefits like Social Security payments.<\/p>\n\n\n\n Under the program, the government can withhold entire federal tax refunds and up to 15% of a federal worker\u2019s disposable pay. The government said the FSA would send notices about wage garnishment later this summer.<\/p>\n\n\n\n In an April\u00a0opinion piece published in The Wall Street Journal,<\/a>\u00a0McMahon said borrowers who don\u2019t make payments on time will see their credit scores go down, \u201cand in some cases their wages automatically garnished.\u201d<\/p>\n\n\n\n Before leaving the White House in January, then-President Joe Biden announced his administration had canceled student debt for more than 5 million people, including many who attended schools that defrauded students, like DeVry University<\/a>, as well as public service workers and those with total and permanent disabilities.<\/p>\n\n\n\n \u201cSince Day One of my Administration, I promised to ensure higher-education is a ticket to the middle class, not a barrier to opportunity, and I\u2019m proud to say we have forgiven more student loan debt than any other administration in history,\u201d Biden said in a statement<\/a> at the time.<\/p>\n\n\n\n In its April news release, however, Trump\u2019s Education Department made it clear that \u201cthere will not be any mass loan forgiveness\u201d going forward.<\/p>\n\n\n\n McMahon blamed the Biden administration for transferring hundreds of billions of dollars in debt to taxpayers and keeping borrowers in a \u201cconfusing limbo\u201d about payments.<\/p>\n\n\n\n \u201cThe executive branch does not have the constitutional authority to wipe debt away, nor do the loan balances simply disappear,\u201d she said.<\/p>\n\n\n\n Trump paused collection on most federal student loans in March 2020, and Biden continued to pause collection when he took office in 2021.<\/p>\n\n\n\n Biden had proposed allowing eligible borrowers to cancel up to $20,000 in debt until the U.S. Supreme Court ruled against his student loan debt relief plan<\/a> in 2023. The plan would have cost more than $400 billion, and about 43 million Americans would have been eligible to participate.<\/p>\n\n\n\n In the Wall Street Journal op-ed, McMahon said Biden \u201cnever had the authority to forgive student loans across the board.\u201d<\/p>\n\n\n\n She said resuming collections was not an act of unkindness to student borrowers but an act of fairness.<\/p>\n\n\n\n \u201cBorrowing money and failing to pay it back isn\u2019t a victimless offense. Debt doesn\u2019t go away; it gets transferred to others,\u201d she said. \u201cIf borrowers don\u2019t pay their debts to the government, taxpayers do.\u201d<\/p>\n\n\n\n