The federal government has restarted involuntary collections on education debt after a hiatus that lasted more than five years. This significant policy shift affects millions of Americans who have outstanding student loans and marks the end of one of the longest pauses in federal student loan enforcement actions.
The resumption of these collections means that borrowers who have defaulted on their federal student loans may now face consequences such as wage garnishment, tax refund seizures, and Social Security benefit offsets. These tools allow the government to recover unpaid education debt without requiring the borrower’s consent.
Background on the Collection Pause
The halt on involuntary collections began in March 2020 as part of the COVID-19 emergency relief measures. Initially intended as a short-term pandemic response, the pause was extended multiple times by both the Trump and Biden administrations as the economic effects of the pandemic continued to impact borrowers.
During this period, millions of borrowers experienced financial relief as collection activities ceased. The Department of Education estimates that the pause prevented approximately $5 billion in collections annually from being taken from borrowers’ wages, tax refunds, and benefits.
Impact on Borrowers
The restart of collections will have varying effects on different groups of borrowers. Those most likely to feel immediate impacts include:
- Borrowers already in default before the pandemic
- Those who became delinquent after loan payments resumed in October 2023
- Individuals with older Federal Family Education Loans (FFEL) or Perkins loans
Financial experts warn that the timing of this restart could be challenging for many Americans still recovering from pandemic-related financial hardships. Consumer advocates have expressed concern that the resumption might push financially vulnerable borrowers into greater economic distress.
Available Options for Borrowers
The Department of Education has emphasized that borrowers facing potential collections have several options to avoid these measures. These include entering rehabilitation programs, consolidating defaulted loans, or applying for income-driven repayment plans.
“We want borrowers to know that getting out of default is possible,” a Department of Education spokesperson stated. “There are paths available that can not only stop collections but also restore loans to good standing.”
The Fresh Start program, launched in 2023, offers borrowers in default a one-time opportunity to return their loans to good standing without having to make payments first. However, borrowers must take action to enroll in this program before facing collections.
Political and Economic Context
The restart comes amid broader debates about student loan policy in the United States. After the Supreme Court struck down the Biden administration’s broad loan forgiveness plan in 2023, the administration has pursued more targeted relief measures while also returning to standard loan servicing operations.
Critics of the resumption argue that the government should have extended the collection pause until more comprehensive student loan reforms could be implemented. Supporters counter that returning to normal collection procedures is necessary for the financial sustainability of the federal student loan system.
Economists note that the return of collections may have mixed effects on the broader economy. While it could increase government revenue, it might also reduce consumer spending among affected borrowers.
As this policy change takes effect, borrowers are encouraged to contact their loan servicers or visit the Federal Student Aid website to understand their options and take proactive steps if they’re at risk of collections. With proper planning, many can avoid the most severe consequences of this enforcement restart.
