The U.S. Department of Education announced last month that the Office of Federal Student Aid would resume collections of its defaulted federal student loan portfolio on Monday, May 5.
This follows a pause of more than five years, beginning in the early days of the pandemic in March of 2020, during the first Trump Administration.
That pause was originally supposed to expire in October of 2023, but the Biden Administration pushed the expiration back, amid the Biden’s ill-fated push to forgive some student loan debt.
The move, the DoE said, “protects taxpayers from shouldering the cost of federal student loans that borrowers willingly undertook to finance their postsecondary education.”
10 Million Americans Could Soon Be in Default on Student Loans
According to the Trump Administration’s figures, 42.7 million borrowers currently owe a total of more than $1.6 trillion in student debt.
There are now 5 million borrowers who “sit in default,” a number that could double within a few months to 10 million.
“When this happens, almost 25 percent of the federal student loan portfolio will be in default,” the Department said.
Per CNN, federal student loans are considered in default if they go 270 days without payment.
What Happens on May 5?
According to the Administration, the Office of Federal Student Aid will restart the Treasury Offset Program, which will begin email communications to borrowers who are in default, and encouraging them to contact the Default Resolution Group.
This will allow borrowers to set up payments, or also to “enroll in an income-driven repayment plan, or sign up for loan rehabilitation.”
The next step? “Administrative wage garnishment.”
Per CNBC, the federal government has lots of options when it comes to that, including “seizing borrowers’ tax refunds, paychecks and Social Security retirement and disability benefits.” Which is to say nothing of credit scores being affected.
Complicating matters further? The Trump Administration has cut staff at the Department of Education, amid vowing to get rid of the department altogether. So there will likely not be as many personnel around to help borrowers with the change.
Congress’ Own Loan Plan
Last week, as part of the negotiations in Congress over the “Big Beautiful Bill,” the House Education and Workforce Committee released what it calls the Student Success and Taxpayer Savings Plan, which will overhaul how student loans work, while also cutting a proposed $330 billion from loan programs.
Blaming the Biden Administration for its “misguided and unlawful actions have only added to this crisis rather than address the root issues,” the committee revealed that it plans to “save” the $330 billion, to pay for tax cuts, or in the committee’s words, to “help advance President Trump’s agenda to provide tax relief for American families and small businesses, rein in wasteful spending, and reduce the federal budget deficit.”
Those cuts will be achieved, according to the plan, by imposing a $50,000 borrowing cap for federal student loans, one that rises to $100,000 for graduate students. It will also cut the number of options available for income-driven repayment (IDR) loans, while raising the number of hours required for Pell Grant eligibility.
The Education and Workforce Committee has put this plan forward to the House Budget Committee for later consideration before the full House floor.
However, that doesn’t mean it will necessarily pass in this form. There are all sorts of disagreements among Republicans over what will and won’t end up included in the “Big Beautiful Bill,” the final form of which remains far from determined.
And that’s before the question of whether the version in the House can get through the Senate.
“I shut most of that out because they debate a lot of stuff. I call it a sandstorm of bad ideas,” Sen. Bernie Moreno (R-OH) told Semafor this week of the House debates over the bill.
“I don’t know what it’s going to look like when the smoke clears, but it’ll be changed,” Sen. John Kennedy (R-LA) told Semafor in the same story.
About the Author
Stephen Silver is an award-winning journalist, essayist and film critic, and contributor to the Philadelphia Inquirer, the Jewish Telegraphic Agency, Broad Street Review and Splice Today. The co-founder of the Philadelphia Film Critics Circle, Stephen lives in suburban Philadelphia with his wife and two sons. For over a decade, Stephen has authored thousands of articles that focus on politics, technology, and the economy. Follow him on X (formerly Twitter) at @StephenSilver, and subscribe to his Substack newsletter
