The U.S. Department of Education has announced that it will restart the process of involuntary collections, including wage garnishments, for student loan borrowers as early as May 5. This decision comes after a five-year pause in collection activity on federal student loans. The Biden administration has taken a less aggressive approach compared to the Trump administration, focusing on extending relief measures to struggling borrowers during the Covid pandemic.
There are more than 42 million Americans holding federal education debt exceeding $1.6 trillion, with an estimated 10 million borrowers in default within a few months. The government can seize federal tax refunds, wages, Social Security benefits, and other funds such as state tax refunds and lottery winnings to collect on defaulted student loans.
Borrowers in default can take steps to avoid collection activity by contacting the Default Resolution Group to explore options such as enrolling in an income-driven repayment plan, signing up for loan rehabilitation, or requesting deferments or forbearance. If facing garnishment of Social Security benefits or wages, the government must provide notice before initiating collection activity. Borrowers may have the option to request a hearing before an administrative law judge or challenge the garnishment if it will result in financial hardship.
It is essential for borrowers to be proactive in addressing their defaulted student loans to avoid collections and protect their income. Contacting the Education Department for assistance and exploring available repayment options can help prevent the seizure of funds and alleviate financial strain.
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