What to know about student loan debt collections
Add Axios as your preferred source to
see more of our stories on Google.
Illustration: Sarah Grillo/Axios
The federal Department of Education is once again referring student loan borrowers in default to debt collectors.
Why it matters: After a five-year penalty pause, the 5.3 million borrowers in default could see their wages and tax refunds garnished if they don't resume payments.
- The federal government is reporting defaulted student loans to credit agencies, potentially affecting millions of credit scores.
By the numbers: Roughly 38% of nationwide borrowers are actively repaying their student loans and remain current on their payments, per the education department. The rest are in forbearance, deferment or delinquency.
Zoom in: Pennsylvania borrowers have an average of $36,267 in student debt, slightly below the national average of $37,853, per the Education Data Initiative.
- Over 1.8 million Pennsylvanians — 55% under 35 years old — owe $66.3 billion in student loans.
When will collections start?
The department restarted involuntary collections on Monday through the Treasury Offset Program, which collects delinquent debts that people owe to government agencies through wage garnishment and other methods.
- Wage garnishment is a legal procedure in which employers are ordered to withhold a person's earnings for the payment of a debt, such as unpaid child support.
- There will be a 30-day notice, after which the department will begin garnishing wages for borrowers in default.
- Student loans are considered in default after 270 days without payments.
What are the next steps?
- Check your default status by logging into StudentAid.gov or running a free credit report.
- Borrowers can sign up for an income-driven repayment (IDR) plan or loan rehabilitation.
- Income-driven repayment plans like SAVE base payments on income and family size, not loan balance. A court blocked SAVE and similar plans in February, but as of March 26, the online application is available again.
Yes, but: Some experts are worried that SAVE is on the chopping block.
Between the lines: The move is part of the Trump administration's efforts to roll back Biden-era student loan forgiveness policies.