After a significant hiatus, the collection of defaulted federal student loans has kick-started again, making waves for millions of borrowers. As reported by FOX San Antonio, the Department of Education’s renewed efforts could lead to wage and benefit garnishment for those in hot water with their student loans; this move is seen as part of a larger sweep to reverse loan forgiveness policies established in previous years.
This development comes as the Trump administration seeks to dismantle aspects of the Education Department, moving aggressively to scrap initiatives spearheaded by former President Biden—actions that could see an uptick in defaults, considering that "there are 4 million additional borrowers in 'late-stage delinquency,' which occurs after 90 days without payment," as revealed in a recent CNN article. With garnishments expected to resume through the Treasury Department's offset program, both Federal and state benefits are up for grabs as part of collection efforts and Social Security income could take a hit as a consequence.
For borrowers who aren't sure about their loans' status, both articles stress the importance of confirming with their loan servicer or checking the Federal Student Aid website. Rehabilitation emerges as a highlighted reprieve, wherein borrowers, "after making nine voluntary, uninterrupted payments over a 10-month period," as CNN elucidates, might wiggle their way out of default. It should be noted, though, that loan consolidation, while another potential exit strategy, resets any progress made towards income-driven repayment forgiveness.
Although the path through bankruptcy for student debt discharge has seen loosened restrictions under the Biden administration, the buzz is that leniency might wane with the current administration’s agenda, with one attorney speculating to CNN, "the current administration will be less generous than the Biden administration was." Amidst these shifts, Betsy Mayotte, president of The Institute for Student Loan Advisors, advised caution to those wading through these murky waters shocked by potential scams, asserting that, "There’s never a fee to access rehabilitation or consolidation, and paying someone a fee is not going to get it for you any faster, or get you a better deal than you can by just doing it yourself."
