After a three-year pause tied to the pandemic, the U.S. Department of Education has restarted federal student loan collections on April 21. For the 43 million borrowers with outstanding balances, this marks a major shift: the safety net that halted payments and froze interest is gone.
Collections will be enforced through a Treasury Department program that can withhold entire federal tax refunds, up to 15% of disposable wages, and portions of government benefits like Social Security. Notices about wage garnishment will hit mailboxes later this summer.
"American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies," said U.S. Secretary of Education Linda McMahon in announcing the restart. For those in default, missed payments can drag down credit scores and make future borrowing tougher.
TransUnion's latest data show only a third of borrowers consistently pay down their loans, while one in five is over 90 days past due. Michele Raneri, vice president and head of research at TransUnion, warns that delays often stem from confusion or financial strain: "Borrowers may not know they have to pay, how to do so, or simply lack the capacity."
Advocates argue the timing is harsh, as inflation and rising living costs squeeze budgets. "We're in the worst student loan landscape that we've ever been in before," says Sabrina Calazans of the Student Debt Crisis Center. She cautions that millions could face a "financial catastrophe" if they can't meet basic needs.
As collections resume, borrowers should review their repayment options, set up automatic payments, or explore income-driven plans. Staying informed now could prevent credit damage and financial stress down the road.
Reference(s):
cgtn.com
