Millions of student loan borrowers in default will start receiving notices on Monday that they are being put into collections.
The move comes after the Department of Education said last month that it is trying to protect U.S. taxpayers “from shouldering the cost of federal student loans that borrowers willingly undertook to finance their postsecondary education.”
“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” Secretary of Education Linda McMahon said in a statement. “The Biden Administration misled borrowers: the executive branch does not have the constitutional authority to wipe debt away, nor do the loan balances simply disappear.”
The Department of Education said its “Office of Federal Student Aid (FSA) will resume collections of its defaulted federal student loan portfolio on Monday, May 5th,” after not doing so since March 2020, which was the beginning of the coronavirus pandemic.
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“Today, 42.7 million borrowers owe more than $1.6 trillion in student debt,” according to the Department. “More than 5 million borrowers have not made a monthly payment in over 360 days and sit in default — many for more than 7 years — and 4 million borrowers are in late-stage delinquency (91-180 days). As a result, there could be almost 10 million borrowers in default in a few months.”
“All borrowers in default will receive email communications from FSA … urging them to contact the Default Resolution Group to make a monthly payment, enroll in an income-driven repayment plan, or sign up for loan rehabilitation,” the Department added. “Later this summer, FSA will send required notices beginning administrative wage garnishment.”
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A pause in payments during the pandemic ended in 2023, but the Biden administration extended that no-consequences period through the 2024 election as the former president tried to pass loan-forgiveness programs, according to The Wall Street Journal.
“While Congress mandated that student and parent borrowers begin to repay their student loans in October 2023, the Biden-Harris Administration refused to lift the collections pause and kept borrowers in a confusing limbo. The previous Administration failed to process applications for borrowers who applied for income-driven repayment and continued to push misguided ‘on-ramps’ and illegal loan forgiveness schemes to win points with borrowers and mask rising delinquency and default rates,” the Department of Education said.
Potential penalties for those in default include the withholding of federal benefits such as tax returns and social security checks, The Wall Street Journal reported.
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