This blog post was republished in insideARM on May 6, 2025.

On April 21, the U.S. Department of Education announced that its Office of Federal Student Aid (FSA) will resume collections on defaulted federal student loans starting Monday, May 5th. This decision ends a collections pause that has been in place since March 2020. According to the announcement, the resumption of collections is intended to protect taxpayers from bearing the cost of federal student loans that borrowers undertook to finance their education.

Background and Rationale

The collections pause was initially implemented to provide relief to borrowers during the COVID-19 pandemic. However, the Biden-Harris Administration extended this pause beyond the congressional mandate that required repayments to resume in October 2023. According to U.S. Secretary of Education Linda McMahon, this extension created confusion and delayed necessary actions to address rising delinquency and default rates.

Current State of Federal Student Loans

  • Total Debt: 42.7 million borrowers owe over $1.6 trillion in student debt.
  • Defaults and Delinquencies: Over 5 million borrowers have not made a payment in over 360 days, and 4 million are in late-stage delinquency. This could lead to nearly 10 million borrowers in default soon.
  • Repayment Status: Only 38% of borrowers are current on their loans. The rest are either delinquent, in forbearance, or deferment.

Next Steps

Borrowers in default will receive email communications from FSA over the next two weeks, urging them to take action. Options include making a monthly payment, enrolling in an income-driven repayment plan, or signing up for loan rehabilitation. Later this summer, FSA will begin administrative wage garnishment for those who do not respond.

FSA is committed to providing clear information and support to help borrowers navigate their repayment options. Over the next two months, FSA will launch a comprehensive communications campaign, including emails and social media outreach. Tools like the new Loan Simulator, AI Assistant (Aiden), and extended call times with servicers will be available to assist borrowers.

Additionally, FSA will simplify the Income-Driven Repayment (IDR) process, eliminating the need for annual income recertification. More information will be available on StudentAid.gov next week.