Some 5 million Americans with non -compliance student loan payments will receive their loans for collections on May 5, the Department of Education announced Monday.
Next month, for the first time since the student loan payments were arrested due to the start of the COVID-19 pandemic, the Department of Education will collect the debts of the borrowers who had breached, which means that they had not paid their debts for about nine months or 270 days, before the pandemic.
The announcement occurs when dozens of federal student help employees (FSA) in the Department of Education as part of President Donald Trump’s efforts to close the agency, which creates uncertainty for borrowers and the future of the student loan system, according to former Secretary of Education James Kvaal.
“The concern is that the department is, you know, cut the people who would help borrowers make this transition,” Kvaal told ABC News. “The borrowers trying to get help when entering an affordable payment plan or requesting loan forgiveness, if they are eligible, you know, they simply do not have the same resources they did before the department staff were reduced in half.”
An exterior view of the building of the Department of Education, March 13, 2025, in Washington, DC
Alex Wong/Getty Images
The pause, began in 2020 in the first Trump administration, for the 43 million student loan borrowers was implemented due to economic difficulties and interruption caused by Covid. This will be the first time in five years that payments have begun.
Kvaal said the breaches can be “tragic” for borrowers. In some cases, Kvaal said, breaches can negatively affect credit scores and future student help, and several states revoke driving licenses on breaches.
However, the department emphasized that its effort will protect taxpayers from assuming the cost of federal student loans that borrowers “voluntarily” undertook. The Secretary of Education, Linda McMahon, also said that taxpayers will no longer be responsible for the “irresponsible policies of student loans” of the previous administration.
“The Biden administration cheated the borrowers: the executive branch does not have the constitutional authority to eliminate debt, nor the balances of the loans simply disappear,” McMahon wrote in a statement in the department. “Hundreds of thousands have already been transferred to taxpayers. In the future, the Department of Education, together with the Treasury Department, will guide the Student Loan Program in a responsible manner and in accordance with the law, which means helping the borrowers to return to reimburse, both for the good of their own financial health as the economic perspective of our nation.”
An unfulfilled loan is a loan that a borrower has not made payments for 270 days, according to the Federal Student Aid Office. When the loan officially enters non -compliance, it becomes eligible for mandatory collections.
Loan collections are generally carried out through salary garrisons, a legal procedure in which a person’s profits are required by court order to be retained by an employer for the payment of a debt, according to the Labor Department.
Student debt can also be collected through compensation tax reimbursements or other federal benefits, which Kvaal said it can include the social security of one. The collection process that begins in just two weeks is blocking the path of these borrowers outside the breach, according to the executive director of the Protection Center of the Borrower, Mike Pierce. Pierce said the Trump administration is feeding them with the “jaws of the government’s debt collection machine.”
“This is cruel, unnecessary and will further advance the flames of economic chaos for working families in this country,” Pierce told ABC News in a statement.
But administration’s efforts to place borrowers in involuntary collections programs will be combined with a comprehensive communications and dissemination campaign to ensure that borrowers understand how to return to reimbursement or get out of breach, according to the department statement.
Students walk along the Universidad de Illinois campus in Urbano-Champaign, February 5, 2025.
Brian Cassella/Chicago Tribune/Tns through Getty Images
The news also occurs when the administration is working to relocate the student loan portfolio of $ 1.6 billion to other agencies. Trump announced that the loan system will move to the administration of small businesses “immediately” during a White House event last month.
After the announcement, Kvaal, who worked in senior roles in the administrations of Obama and Biden, told ABC News that his Low Obama higher education portfolio included transferring some loan functions to the Department of the Treasury. But he warned that changing the student loan portfolio could again lead to real world.
“Now we are at a point where millions of borrowers are late for their student loans,” he said. “For the department to focus on saying half of its staff and going through a fundamental reorganization of how it manages these programs, you already know, in really criticism for weeks for borrowers trying to enter paid plans or obtaining loan forgiveness, I think it is very dangerous and puts millions of borrowers of breach of breach in non -compliance in their preliminary.”
