WASHINGTON — The Education Department announced Monday it will begin the debt collection process on student loans that are in default. According to the Associated Press, that will include the garnishment of wages for millions of borrowers.
An estimated 5.3 million borrowers are currently in default on their student loan payments, the AP reports. Debt collection has been paused for federal student loans since March 2020, when the COVID-19 pandemic began. During his time in office, former President Joe Biden attempted multiple times to forgive student loans, but the courts eventually blocked those plans.
President Donald Trump has tasked Education Secretary Linda McMahon with overhauling the department and part of that includes going after delinquent loans.
“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” McMahon said.
Student loans are considered to be in default after payments are not made for nine months. The AP reports that along with the 5.3 million people already in default on their loans, an additional 4 million are 91 to 180 days late. Less than 40% of all borrowers are up-to-date on their loan payments.
Starting May 5, the Treasury Department will begin using its offset program to collect money owed for student loans. The program allows the Treasury to withhold government payments like tax refunds, federal salaries and other benefits in order to settle past-due debts to the government.
A 30-day notice will also be issued to delinquent borrowers alerting them that wage garnishments will also begin for student loans in default.
Critics of the decision say it comes at a time when borrowers are still unsure of all the changes being made at the Education Department. Questions about income-driven repayment plans and previously forgiven loans are still being addressed by the courts and the Trump administration.. It can be difficult for borrowers to know where to turn for help because of how quickly things are changing with repayment programs.
For instance, in February the Education Department took down applications for income-driven repayment programs, but then restored the applications a month later. Meanwhile, the courts have blocked some previously approved forgiveness plans, leaving those borrowers in limbo about what to do next.
“This is cruel, unnecessary and will further fan the flames of economic chaos for working families across this country,” said Mike Pierce, executive director of the Student Borrower Protection Center.
Despite the confusion, McMahon says it’s time to move past Biden’s efforts to forgive student loans.
“Going forward, the Department of Education, in conjunction with the Department of Treasury, will shepherd the student loan program responsibly and according to the law, which means helping borrowers return to repayment — both for the sake of their own financial health and our nation’s economic outlook,” McMahon said.
