The U.S. Department of Education announced Monday that it will resume “involuntary collections” on federal student loan debt starting next month, including wage garnishment for borrowers in default.
These collections, which have been paused since March 2020, are scheduled to restart on May 5 and are expected to affect an estimated 5.3 million borrowers who are currently in default on their federal student loans.
According to CNBC, the government will carry out the collections through the Treasury Offset Program, which allows the government to withhold or reduce federal payments, such as tax refunds, Social Security benefits, and federal salaries, to recover overdue debt.
“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” U.S. Secretary of Education Linda McMahon said in a statement.
“The Biden Administration misled borrowers: the executive branch does not have the constitutional authority to wipe debt away, nor do the loan balances simply disappear.”
The agency noted that more than 5 million borrowers are currently in default, with another 4 million in “late-stage delinquency,” or over 90 days past due on payments.
“As a result, there could be almost 10 million borrowers in default in a few months,” the DOE warned. “When this happens, almost 25% of the federal student loan portfolio will be in default.”
They added that only 38% of borrowers are actively repaying and current on their loans.
The move to send debt to collections drew criticism from advocates, who said borrowers were experiencing confusion with the ever-changing loan policies between the Biden and Trump administrations.
“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.
However, DOE maintains that it’s committed to putting both borrowers in default and those current on a “productive path toward repaying their federal student loans.”
“Over the next two months, [Office of Federal Student Aid] will conduct a robust communications campaign to engage all borrowers on the importance of repayment,” they said. “FSA will conduct outreach to borrowers through emails and social media reminding them of their obligations and providing resources and support to assist them in selecting the best repayment plan.”
“FSA intends to enlist its partners…to assist in this campaign to restore commonsense and fairness with the message: student and parent borrowers – not taxpayers – must repay their student loans,” the department added, while noting,” There will not be any mass loan forgiveness.”
