U.S. Education Department to restart student loan collections in May

The U.S. Education Department will restart collection on defaulted student loans beginning Monday, May 5, affecting approximately 5.3 million borrowers, according to The Guardian's recent report which details the resumption of federal student loan collections after a four-year pause. This move marks the end of pandemic-era relief measures that began in March 2020 when no federal student loans were referred for collection. Education Secretary Linda McMahon explained that American taxpayers "will no longer be forced to serve as collateral for irresponsible student loan policies." 

Beginning next month, the department will commence involuntary collection through the Treasury Department's offset program, which can withhold government payments including tax refunds and federal salaries from people with past-due debts. After providing a 30-day notice, the department will also begin garnishing wages for borrowers in default, as outlined in The Guardian's coverage; the report emphasizes that this shift has drawn criticism from advocates who argue borrowers have experienced confusion with changing policies between administrations.

The New York Post reports that Secretary McMahon has defended the administration's decision by claiming that colleges have "profited massively" from Biden-era loan forgiveness measures while making "empty promises to students." In her Wall Street Journal op-ed addressing the move, McMahon criticized universities for pocketing loan dollars while graduates end up "six figures in the red." She cited a 2015 study showing that for every dollar increase in federal loan caps, colleges raised tuition by 60 cents, information highlighted by the Post to demonstrate alleged institutional profiteering. McMahon insisted the collections weren't being enforced to be "unkind" but because debt repayment is necessary. As the Post notes, she emphasized that when borrowers don't repay government debts, taxpayers ultimately bear the burden.

The Wall Street Journal explains that the Education Department will also end what McMahon called the "Biden-era practice of zero-interest, zero-accountability forbearances" that she believes push borrowers into delinquency and default. McMahon's statements in the Journal emphasize that student loans are unlike other consumer debts because they lack collateral, making them difficult to discharge even in bankruptcy since "it is impossible to repossess a college degree." 

According to the Journal, McMahon is committing to holding both borrowers and educational institutions accountable, arguing that many degree programs "are worthless on the job market" yet colleges continue encouraging students to borrow for them. The department is expanding support services for borrowers, with the Journal noting that they've extended Federal Student Aid call center operations to include weekend hours and updated their loan simulator to help calculate repayment plans.