Department of Education Delays Involuntary Collections on Federal Student Loans

The U.S. Department of Education said Friday (Jan. 16) that it will temporarily delay the implementation of involuntary collections on federal student loans so it can add more ways for borrowers to repay their loans.

During the delay, the agency will implement student loan repayment reforms that were included in the Working Families Tax Cuts Act, it said in a Friday press release.

Those reforms include simplified federal student loan repayment plans that make it easier for borrowers to select the plan that best meets their needs, as well as a second chance to rehabilitate a defaulted loan so that borrowers can get their repayments back on track, according to the release.

The delay in collections will give borrowers more time to evaluate the new payment options and to begin the rehabilitation process, per the release.

“After the Biden Administration misled borrowers into believing their student loans would not need to be repaid, the Trump Administration is committed to helping student and parent borrowers resume regular, on-time repayment, with more clear and affordable options, which will support a stronger financial future for borrowers and enhance the long-term health of the federal student loan portfolio,” Under Secretary of Education Nicholas Kent said in the release.

It was reported in May that the Trump administration planned to put millions of defaulted federal student loan borrowers into collections, threatening the confiscation of tax refunds, federal benefits and wages from affected individuals.

The move reversed a program taken by the Biden administration that attempted broad student debt forgiveness and extended a no-consequences period for nonpayment through the 2024 election.

At the time, about 5 million borrowers were in default.

TransUnion said in September that almost 30% of student loan borrowers were behind on their payments and that millions of these delinquent borrowers were preparing for involuntary collections from the Department of Education in the form of wage garnishment or the withholding of tax refunds or Social Security benefits.

An Education Department spokesperson told NPR in December that the department was set to resume garnishing wages from student loan borrowers in default and that it expected “the first notices to be sent to approximately 1,000 defaulted borrowers the week of Jan. 7.”