The Department of Education has resumed collecting on defaulted student loans, putting millions at risk of wage and benefit garnishment. This policy shift comes as the Trump administration rolls back Biden-era reforms aimed at student debt relief.
Who’s Affected?
Over 5 million borrowers are currently in default, and another 4 million are in late-stage delinquency. Those not in default yet are not affected by this change, but experts urge all borrowers to check their loan status to stay informed.
What Is Default?
Federal student loans enter default after 270 days of missed payments. If you’re unsure about your status:
- Check your credit report
- Contact your loan servicer
- Visit studentaid.gov for up-to-date information
How Will Collections Work?
The government has reactivated the Treasury Offset Program, allowing it to collect from:
- Federal and state tax refunds
- Social Security benefits
This summer, the Education Department will also restart administrative wage garnishment, where employers may be ordered to withhold part of a borrower’s paycheck.
How to Get Out of Default
1. Loan Rehabilitation
Make nine consecutive, voluntary payments over 10 months. Payments are based on your income, generally 10–15% of discretionary income. Rehabilitation removes the default from your credit report, though previous delinquency will still appear.
2. Loan Consolidation
Combine multiple federal loans into one. This resets eligibility for income-driven repayment plans but restarts the forgiveness timeline.
Are Deferment or Forbearance Options?
Not while in default. Borrowers lose access to deferment, forbearance, and repayment plan choices until they either rehabilitate or consolidate their loans.
Can Bankruptcy Discharge Student Loans?
Discharging student debt in bankruptcy is rare, but possible under the Brunner Test, which requires showing:
- An inability to maintain a basic standard of living
- That hardship will continue long-term
- A good faith effort to repay
Thanks to Biden-era reforms, more borrowers succeeded in discharges, but this may become harder.
Watch Out for Scams
Be cautious of companies promising quick relief for a fee.
Visit studentaid.gov for official information and scam alerts.
For more tips and updates on student loans, stay tuned to Que Onda Magazine.