By Aissa Canchola Bañez and Mike Pierce | April 23, 2025
The U.S. Department of Education (ED) announced that, on May 5, 2025, millions of student loan borrowers would begin to have money forcibly seized by the federal government to repay defaulted student loans. The return of so-called “involuntary collections” would be the federal government’s first attempt to use these aggressive debt collection tactics to pursue borrowers who have fallen behind since President Trump shut off the student loan system at the start of the COVID-19 pandemic in March 2020.
The student loan system fails to serve borrowers who struggle—routinely collecting money from families for amounts far beyond what borrowers should owe, pushing seniors into poverty, and seizing money from borrowers’ paychecks even when told to stop garnishing wages.
As President Trump and Secretary McMahon prepare to set their student debt collectors loose on American families, ED has yet to answer basic questions about how this will work, who will be required to pay, when payments are collected, and how much borrowers will owe.
Who is required to repay a loan in default?
- Will seniors whose only income is Social Security have that money seized by the Trump Administration?
- Will people with disabilities, whose only income is Social Security, have that money seized by the Trump Administration?
- Will veterans with service-connected disabilities have their public benefits seized?
- Will taxpayers who are owed an Earned Income Tax Credit have that payment seized?
- Will taxpayers who are expecting to receive a tax refund for the 2024 tax year see that payment seized?
When will payments be collected?
- In its April 21 announcement, ED states that they will “restart the Treasury Offset Program” administered by the U.S. Department of the Treasury on Monday, May 5, 2025. Is this the date the Administration plans to send borrowers in default a written notice of the Secretary’s intent to refer student debts to the Secretary of Treasury for offset and an opportunity to request a review, object to the offset, or enter into a repayment agreement? If so, how much time between notice and the first offset will there be so borrowers can plan accordingly?
- If the Administration does not plan to send these notices, what is the earliest date that a borrower will have money seized by the federal government?
- ED’s announcement also states that Federal Student Aid will begin sending required notices to begin garnishing wages of working borrowers in default by “later this summer.” What is the earliest date on which ED plans to begin sending these notices?
- What is the earliest date a borrower will begin seeing their wages garnished by the Trump Administration?
How are borrowers being notified?
- The Trump Administration claims that “all borrowers in default will receive email communications” in the next two weeks notifying them of these developments. Do all borrowers in default have email addresses on file?
- Has the government validated the email addresses being used for these legally required notices?
- How will ED ensure they have accurate and updated contact information for borrowers before subjecting them to collections?
- If a borrower does not receive a legally required notice because the government does not have a working email address, will they be subject to forced collections?
How much will borrowers owe?
- Will the Trump Administration honor the increased protection established by the Biden Administration to allow defaulted borrowers receiving Social Security to protect a higher amount of their benefits from offset (up to 150% of federal poverty guidelines) in order to avoid extreme financial hardship?
- Will government debt collectors charge borrowers fees to collect defaulted loans?
- ED also announced that borrowers who owe guaranteed loans made by banks and other private lenders (FFELP loans) will be subject to forced debt collection. Will the private debt collectors that collect on these loans charge borrowers fees?
How will borrowers get help?
- The recent Reductions in Force (RIF) at ED have gutted entire teams that were helping borrowers experiencing challenges with their student loans and student loan servicers. How will ED ensure that borrowers are able to get help if they face any issues with their student loans, including trying to get out of default?
- The RIFs have also severely gutted the Consumer Financial Protection Bureau (CFPB), which would have been the place where borrowers could submit complaints if they were experiencing any issues with private companies across the student market, including errors relating to Social Security benefit offset, or any issues related to wage garnishment. With the CFPB abandoning oversight in the student loan market, where is ED directing borrowers who face issues in response to the Administration’s policy?
- How will ED protect borrowers from scams that could proliferate as borrowers desperately seek information on how to protect themselves from collections?
How will ED spread the word to the public?
- The Trump Administration claims they will begin a “robust” communications campaign to conduct outreach to borrowers through email and social media and will work to enlist partners to raise awareness among borrowers. Considering the mass layoffs at ED, how does the Department plan to sufficiently staff such a campaign? ED claims that this campaign will begin over the next two months. Which stakeholders has ED begun conducting outreach to (if at all) and how will it ensure that these groups work directly with student loan borrowers in need of this information?
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Aissa Canchola Bañez is the Policy Director at SBPC. Previously, Aissa led outreach and engagement efforts for the Office for Students and Young Consumers at the CFPB.
Mike Pierce is the Executive Director of SBPC. Prior to founding SBPC in 2018, Mike was a senior regulator for the student financial services industry at the CFPB.