Politics · United States · 22 hrs ago
US Weighs Renewing Collections on Defaulted Student Loans
The Trump administration is preparing to restart collections on federal student loans that borrowers have defaulted on.
The plan concerns nearly 10 million borrowers in the United States.
The Treasury Department is considering hiring private debt collectors, while the government could also take wages or some federal payments to recover unpaid loans.
Officials have previously delayed collections amid concerns about the effects on struggling borrowers and disagreements between Treasury and the Education Department.
The plan is unlikely to be announced before the midterm elections, and officials say it could be delayed again while a support center is set up for borrowers seeking to leave default.
A federal budget expert estimated that postponing collections has cost taxpayers about $5 billion so far.
Trump administration officials are preparing to resume financial penalties for millions of federal student loan borrowers in default, according to The Washington Sun.
The plans include hiring private debt collectors and potentially garnishing borrowers’ wages and federal benefits.
The Washington Sun reported that the plans are unlikely to be announced before the midterm elections and could be delayed again.
Officials have disagreed over the policy, with Treasury officials raising concerns about its effects on low-income borrowers.
The administration says it prefers to help borrowers make voluntary payments.
- Who
- Trump administration officials, including officials at Treasury and the Education Department, are involved.
- What
- The administration is preparing to resume collections from borrowers in default, potentially through debt collectors and wage or benefit seizures.
- When
- Officials are preparing for action next year; the plans are unlikely to be announced before the midterm elections.
- Where
- United States.
- Why
- The administration is seeking to collect on defaulted federal student loans; Treasury officials have raised concerns about economic harm to borrowers.
Administration officials pushing to resume collections
Treasury officials concerned about punitive collections
Approach
Administration officials pushing to resume collections
Some officials are preparing to hire private debt collectors and pursue wage and benefit garnishment.
Treasury officials concerned about punitive collections
Treasury officials previously blocked the effort, citing concerns about economic costs and harm to low-income borrowers.
Timing
Administration officials pushing to resume collections
Some officials are pushing to garnish wages and benefits for the current tax year.
Treasury officials concerned about punitive collections
Treasury’s new support center needs to be working first, and officials cautioned that the effort could be delayed.
The White House Office of Management and Budget began helping the Education Department prepare to seize federal benefits and wages, but Treasury officials blocked the effort.
Treasury officials unveiled an online portal intended to help borrowers understand what they owe and how to pay.
Treasury may hire private debt collectors, according to sources cited by The Washington Sun.
The plans are unlikely to be announced before the elections, according to sources.
Some officials are considering garnishing wages and benefits for the current tax year, but the effort could be delayed.
- Borrowers in default
- Nearly 10 million
- Federal student loan portfolio
- $1.7 trillion
- Potential collectors
- Private debt collectors
- Potential measures
- Wage and federal benefit garnishment
- Estimated taxpayer cost of delaying collections
- About $5 billion
3 sources
What people are saying
It would be politically insane to do this before the midterms — but 2027 probably makes a little more sense to give Treasury time to get contracts signed, up and running.
This is not who you think it is. The demographics are not good for us.
We don’t respond to fishing expeditions.