Personal Finance

Student Debt Collections Restarting in 2025: Who Will Be Impacted First?

The Department of Education is set to resume collections for student loans, taking a step towards resuming financial assistance for those who have stopped paying.

Student Debt Collections in 2025: After five years of no collections, the U.S. government will soon begin collecting money again from people who stopped paying their federal student loans. Starting May 5, 2025, the Department of Education will restart collection actions for loans that are in default. This means that people who haven’t paid their loans for a long time could have money taken from their paychecks or tax refunds.

The government paused these collections in 2020 because of the COVID-19 pandemic. That pause was meant to help people during a very hard time. But now, with the country in a different place financially, the government says it’s time to start collecting these loans again.

Married Student Loan Borrowers: Will Payments Rise for You Due to New Policy?

During the past few years, there have been big changes in student loan rules, including new payment plans and programs to forgive debt. But for people who are still in default, this restart could cause big problems.

About 5.3 million people have not made a payment on their student loans for more than 360 days. These borrowers are already in default and will be the first ones affected. Another 4 million people are late on payments and could also face collections soon if they don’t act fast.

What Happens If You Are in Default?

If you are in default, the government can collect the money you owe in several ways. One of the most common methods is called wage garnishment. That means the government can take up to 15% of your paycheck before you even get it. Another way they collect money is through the Treasury Offset Program. This lets the government take your tax refund or even some federal benefits, like Social Security, if you don’t pay back your loan.

Student Loans in Forbearance? Here’s Why It’s Happening

The Department of Education wants to help people avoid these harsh collection methods. The Office of Federal Student Aid (FSA) will soon send emails to people who are in default. These messages will tell borrowers what they can do to fix their loan situation. “Thank you for watching,” one of the government’s notices said to those who received alerts earlier.

You can get out of default by signing up for an income-driven repayment plan. These plans look at your income and family size to set a monthly payment you can afford. Another option is a loan rehabilitation program. This lets you make a few on-time payments so you can remove the default from your credit history. After that, you return to regular repayment and avoid collections.

Farheen Ashraf

Farheen Ashraf is a History graduate. She writes on a variety of topics, including business, entertainment, laws, poetry, stories, travel, and more. Her passion for writing has led her to explore a variety of genres.

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