Student-Loans-Sallie-Mae
After five-year hiatus – and an end to pandemic-era relief on student loans during the Biden administration, the Department of Education announced this week that its Office of Federal Student Aid (FSA) will resume collections of its defaulted federal student loan.
This week, approximately 195,000 defaulted student loan borrowers will begin receiving an official 30-day notice from the U.S. Department of Treasury notifying them that their federal benefits will be subjected to the Treasury Offset Program, which withholds government payments – including tax refunds, federal salaries and other benefits—from people with past-due debts to the government.
Recommended For You
The first monthly benefit checks subject to offset are those scheduled for early June. “Later this summer,” according to the press release, “all 5.3 million defaulted borrowers will receive a notice from Treasury that their earnings will be subject to administrative wage garnishment.”
Today, only 38% of borrowers are in repayment and current on their student loans. Most of the remaining borrowers are either delinquent on their payments, in an interest-free forbearance, or in an interest-free deferment.
There are 42.7 million borrowers who owe more than $1.6 trillion in student debt. More than 5 million borrowers have not made a monthly payment in over 360 days and sit in default and 4 million borrowers are approaching default status (91-180 days). As a result, there could be almost 10 million borrowers in default in a few months, according to the Department.
If no payments are made for 270 days, the loan is considered in default, and the government may begin collection efforts including garnishment. To avoid garnishment, borrowers can seek loan rehabilitation, which allows them to get out of default by making nine consecutive, on-time monthly payments based on their income.
The Department of Education is allowed to garnish up to 15% of an employee’s paycheck without a court order if they go into default on federal student loans and can issue garnishment orders to employers to enforce collection.
All borrowers in default will continue to receive email communications from FSA urging them to contact the Default Resolution Group to make a monthly payment, enroll in an income-driven repayment (IDR) plan, or sign up for loan rehabilitation.
FSA has increased customer service capacity and extended call center hours to ensure borrowers have access to the information and support they need to understand their repayment options, resume making payments on their loans, and rehabilitate defaulted loans when necessary.
Related: Nearly 10M ‘delinquent’ student loan borrowers will see credit scores drop: Federal Reserve Bank
The Department has also authorized guaranty agencies to begin involuntary collections activities on loans under the Federal Family Education Loan Program. All FSA collection activities are required under the Higher Education Act and conducted only after student and parent borrowers have been provided sufficient notice and opportunity to repay their loans under the law.
“As we begin to help defaulted borrowers back into repayment, we must also fix a broken higher education finance system that has put upward pressure on tuition rates without ensuring that colleges and universities are delivering a high-value degree to students,” Education Secretary Linda McMahon said in a statement.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. Prior, she was editor-in-chief of the What's New in Benefits & Compensation newsletter. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast and American Media.
