Student loan borrowers in default are now facing debt collections | Fox Business
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Education Secretary McMahon says there 'isn't going to be any loan forgiveness program'
Education Secretary Linda McMahon discusses efforts to resume collections on defaulted student loans and Harvard University suing the Trump administration over a funding freeze on 'The Bottom Line.'
Millions of student loan borrowers in default will start receiving notices on Monday that they are being put into collections.
The move comes after the Department of Education said last month that it is trying to protect U.S. taxpayers "from shouldering the cost of federal student loans that borrowers willingly undertook to finance their postsecondary education."
"American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies," Secretary of Education Linda McMahon said in a statement. "The Biden Administration misled borrowers: the executive branch does not have the constitutional authority to wipe debt away, nor do the loan balances simply disappear."
The Department of Education said its "Office of Federal Student Aid (FSA) will resume collections of its defaulted federal student loan portfolio on Monday, May 5th," after not doing so since March 2020, which was the beginning of the coronavirus pandemic.
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President Donald Trump speaks to the media after signing executive orders relating to higher education institutions, alongside Secretary of Commerce Howard Lutnick, and Secretary of Education Linda McMahon, right, in the Oval Office of the White Hous (Saul Loeb/AFP via Getty Images / Getty Images)
"Today, 42.7 million borrowers owe more than $1.6 trillion in student debt," according to the Department. "More than 5 million borrowers have not made a monthly payment in over 360 days and sit in default -- many for more than 7 years -- and 4 million borrowers are in late-stage delinquency (91-180 days). As a result, there could be almost 10 million borrowers in default in a few months."
"All borrowers in default will receive email communications from FSA ... urging them to contact the Default Resolution Group to make a monthly payment, enroll in an income-driven repayment plan, or sign up for loan rehabilitation," the Department added. "Later this summer, FSA will send required notices beginning administrative wage garnishment."
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An American flag and a Department of Education flag fly outside the Department of Education building in Washington, D.C., in February. (Reuters/Annabelle Gordon / Reuters Photos)
A pause in payments during the pandemic ended in 2023, but the Biden administration extended that no-consequences period through the 2024 election as the former president tried to pass loan-forgiveness programs, according to The Wall Street Journal.
"While Congress mandated that student and parent borrowers begin to repay their student loans in October 2023, the Biden-Harris Administration refused to lift the collections pause and kept borrowers in a confusing limbo. The previous Administration failed to process applications for borrowers who applied for income-driven repayment and continued to push misguided 'on-ramps' and illegal loan forgiveness schemes to win points with borrowers and mask rising delinquency and default rates," the Department of Education said.
Linda McMahon testifies before a Senate Health, Education, Labor, and Pensions Hearing to examine her nomination to be Secretary of Education on Feb. 13 in Washington, D.C. (Ricky Carioti/The Washington Post via Getty Images / Getty Images)
Potential penalties for those in default include the withholding of federal benefits such as tax returns and social security checks, The Wall Street Journal reported.
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Time to pay the piper you worthless takers.
I have not heard anything about the heroes student loan forgiveness program. I wonder if that will be effected also
We also have programs for teachers, nurses, etc. You would think those will remain.
The article simply talks about people who should be paying but aren't.
Exactly, I have friends that are lawyers, and this article brings 2 very different ones to mind, 1 works in one of the poorer rural communities near where we live, i don't think she has every made more than 30k in a year, she will take a chicken or eggs maybe a quilt for payment for legal work, she diligently follow the program instituted under the ACA for loan payments based on income, she made almost zero payments and then had her loans forgiven last year. the other lawyer makes 6 figures and spends 6 figures but none on her loans, she is now screaming it isn't fair the the other lawyers who followed the rules got their loans forgiven, i say fuck her.
I think the Trump Administrations capriciously zealous behavior so far is justification for concern that they might go too far.
I'm all in favor of collecting debts that people owe.
But lots of people choose to go to college and then into public service because they can have their loans forgiven once that service is complete. If we made them that promise, we need to honor it.
100% agreement,