Under the new rule, effective May 5, 2025, the Trump Administration is intensifying its efforts to collect on defaulted federal student loans. This is a big change in policy after a five-year standstill. The decision comes on the heels of a two-year moratorium on collection activity as a result of the Covid pandemic. This disruption first started in March of 2020. U.S. Secretary of Education Linda McMahon emphasized the administration’s stance, stating that “borrowers should pay back the debts they take on” in a video posted on X on April 22, 2025.
By the first quarter of 2025, about 2.9 million borrowers 62 and older are expected to still be carrying federal student loans. This information has not been made available by the Education Department. This demographic is at risk of devastating financial impacts because the U.S. government has supercharged collection abilities on federal debts. These powers allow the state to garnish borrowers’ federal tax returns, wages, and Social Security retirement and disability income.
Currently, the U.S. government only offsets retirement and disability benefits after standard collection methods—including wage garnishment—have been unsuccessful for one year. They do this because before taking this step, they’ve already exhausted all other options. Currently, borrowers are usually given a 65-day notice before their federal benefits will be garnished. Our experts worry that affected borrowers might begin feeling the financial impacts of the resumed collections even earlier than expected.
The share of borrowers in default has risen at an alarming rate starting in 2017. In other words, as of October 2023 nearly 1.7 million borrowers were in default. That number is expected to explode by 71% to reach 2.9 million by early 2025.
During this time, the Trump administration took a scorched-earth approach to all things collection – a marked turnaround from the past emphasis on finding paths forward for borrowers in crisis. This dramatic juxtaposition serves to emphasize the radically different approaches both administrations have taken. The latter had aimed to assist borrowers in getting current on their loans in light of the pandemic’s economic impact.
As noted in this recent piece from CNBC, experts like Mark Kantrowitz have been sounding the alarm over the negative impact these resumed collections will have, especially on retirees. He raised doubts about the whole idea of notification in the first place, announcing, “Strange that they claim a 30-day notice. The re-starting of collections will put an unfair hardship on those that depend on their limited fixed incomes.
Borrowers like Carolina Rodriguez, one of the advocates who helped lead the charge against these collections, spoke eloquently about the suffering caused by these collections. She noted that “losing a portion of their Social Security benefits to repay student loans could mean not having enough for food, transportation to medical appointments or other basic necessities.”
Borrowers might be eligible for deferments or forbearance that will temporarily stop their payments. Many are unaware of these alternatives or do not have access to them. One advisor suggested that “we’re advising clients to request a retroactive forbearance to cover missed payments, and a temporary forbearance until they can get enrolled in an income-driven repayment plan.”
In recent years, student loan debt and its collection have been hot button topics. More people than ever are facing the new reality of having payments resume and being at risk of future garnishments. As the full force of aggressive collection methods return, millions of borrowers are now caught wondering what this means for their long-term financial security.