Federal Student Loan Collections Restarting May 5, 2025, Since the Pandemic: What Borrowers Need to Know

After a long hiatus, student loan collections will restart in May for borrowers in default. Here's everything you need to understand about the upcoming changes.

Student loan borrowers gather near The White House to tell President Biden to cancel student debt on May 12, 2020 in Washington, DC. Getty Images for We, The 45 Million

The pause on federal student loan collections, which has been in place since the start of the pandemic, is coming to an end. After more than three years, the U.S. Department of Education will restart involuntary collections for borrowers in default on May 5, 2025. This means that those who have fallen behind on their payments for 270 days or more will face collection actions again, including wage garnishments and withholding of tax refunds and Social Security benefits.

This marks the final major step in the return to normalcy for the student loan system, which has been in limbo since the pandemic began. While monthly student loan payments resumed in the fall of 2023, the collection of loans from borrowers in default had been paused to offer relief during the economic crisis caused by COVID-19. With more than 5 million borrowers in default, the restart of collections will impact a large number of individuals who have been behind on their payments for a significant period.

What Does This Mean for Borrowers?

For the past few years, federal student loan borrowers have been protected from the harshest penalties for not paying their loans. But starting on May 5, those protections will end. The U.S. Department of Education will start taking money from the paychecks of borrowers in default and, in some cases, even intercepting tax refunds and Social Security benefits. This marks the first time since March 2020 that these kinds of involuntary collections will resume.

The restart of collections is a big shift, especially considering the financial struggles many borrowers have faced in recent years. While some may argue that this is a necessary step to maintain the integrity of the federal student loan system, others, like advocacy groups, warn that it could lead to severe financial hardship for already-struggling families.

The Debate Over the Restart

There has been considerable pushback against the restart of collections, with many advocating for more leniency and protection for borrowers. Mike Pierce, executive director of the Student Borrower Protection Center, criticized the move, stating that it’s both "cruel" and "unnecessary." He pointed out that many of the repayment programs designed to make loans more affordable for borrowers have been paused due to ongoing legal battles. This means that, despite the government’s plans to restart collections, many borrowers still have limited access to affordable repayment options.

On the other hand, Linda McMahon, the U.S. Secretary of Education, defended the decision, arguing that American taxpayers should no longer bear the burden of unpaid loans. She described the action as necessary to return the program to "responsibility" and accountability.

How Borrowers Will Be Affected

The Department of Education is taking steps to notify borrowers about their default status and offer them options to avoid involuntary collections. Borrowers will be contacted via email in the coming weeks and will be encouraged to either pay their bills, sign up for an income-driven repayment plan, or explore options for loan rehabilitation or consolidation.

For borrowers who are already in default, this is a critical time to act. If you find yourself in this situation, it's essential to respond to these notifications and seek out repayment options as soon as possible. Income-driven repayment plans can offer more manageable monthly payments based on your earnings, which could help you avoid falling further into default.

Looking Ahead: What’s Next for Student Loan Relief?

While the restart of collections is a significant development, there are still ongoing legal battles around student loan relief programs, including the SAVE plan (Saving on a Valuable Education), which bases monthly payments on borrowers' income. The outcome of these cases could have a major impact on the future of federal student loans.

Additionally, President Biden's administration had promised student loan forgiveness for millions of borrowers, and some of that has already been implemented. However, as the courts continue to debate the future of these relief programs, the overall landscape for student loan repayment remains uncertain.

What You Can Do Now

If you're one of the millions of borrowers in default, it’s important to take action before May 5 to avoid the harsh consequences of unpaid loans. The U.S. Department of Education is offering multiple options, including income-driven repayment plans and loan consolidation, to help make your payments more manageable. Reach out to your loan servicer or check the Department of Education's website for more information on your options.

The resumption of student loan collections might feel overwhelming, but with the right information and resources, you can navigate these changes and find a repayment plan that works for you. If you’re unsure about what steps to take, now is the time to seek advice and take control of your financial future.