Move Comes as Millions of Americans Are Still Struggling to Navigate Unprecedented Economic Uncertainty and Record Number of Americans Are Behind on Student Loan Bills
June 3, 2025 | WASHINGTON, D.C. — Last night, the Education Department told reporters that the Trump Administration was reversing course and pausing its plans to offset the Social Security benefits of defaulted student loan borrowers. This news is in stark contrast to the Administration’s April 21st announcement, that starting on May 5, 2025, it planned to subject millions of Americans in default to mandatory collections, including wage garnishment, tax refund, and Social Security benefit offsets.
In response, Student Borrower Protection Center (SBPC) Deputy Executive Director and Managing Counsel Persis Yu released the following statement:
“After threatening the financial security of hundreds of thousands of older Americans and student loan borrowers with disabilities, this Administration’s abrupt turn shows what this entire performance was really about: allowing Secretary McMahon to act tough for an audience of right-wing talking heads and Republican donors, even though the government agency she runs remains profoundly broken.
“As she learns the hard way that you cannot run the government from a Wall Street Journal op-ed, millions of people are paying a heavy price. In the past 90 days alone, roughly 6 million people have experienced catastrophic damage to their credit as they careen towards preventable default without any assistance from the Trump Administration. Simply pausing this collection tactic is woefully insufficient.
“This Administration is heading towards a default catastrophe. The programs that are supposed to help borrowers get out of default and stay out of default have been ravaged by right-wing attacks—which will only get worse if the House reconciliation package passes. Any continued effort to restart the government’s debt collection machine is cruel, unnecessary, and will further fan the flames of economic chaos for working families across this country.”
Background
The decision to resume the government’s collections machine marked the first time in five years that the federal government will penalize Americans who fall behind on their student loan payments. These announcements also come as Americans are navigating unprecedented economic uncertainty—struggling to cover the rising costs of everyday goods, dealing with the economic fallout of mass firings of tens of thousands of federal workers, all while being unable to access the full suite of affordable repayment options to help better manage their student loans. Spokesperson Ellen Keast referenced a future outreach to recipients about affordable loan repayment options, but did not provide any information about what, if any, steps the Administration is taking to ensure the student loan system will meet borrowers’ needs and fulfill their statutory and contractual rights.
The Administration’s decision to resume the government’s collections machinery does not exist in a vacuum. Earlier this year, the Trump Administration chose to block access to affordable student loan payments by removing the Income-Driven Repayment (IDR) and consolidation application and secretly ordered student loan servicers to halt all application processing.
Only after pressure from a lawsuit filed by SBPC and Berger Montague on behalf of the AFT did the Administration restore the application and resume processing. Now, according to recent court filings, nearly 2 million borrowers remain in a backlog waiting for their application to be processed.
Further Reading
SBPC press release on ED’s announcement resuming collection: Advocates Slam Trump Administration for Throwing Millions of Americans With Student Debt Into the Jaws of Government Collections Machine
SBPC press release on filing in AFT v ED regarding IDR application process: New Court Filing Reveals Backlog of Nearly 2 Million Student Loan Borrower Payment Plan Applications
SBPC blog explaining how millions of borrowers are heading towards a default cliff: Millions of Student Loan Borrowers Are Headed Towards A Default Cliff
SBPC press release on Trump Administration initially pulling down IDR applications: Trump Administration Denies Access to Affordable Repayment Plans in Extreme Response to Right-Wing Court Order
Forbes article by Adam Minsky on application processing halt increasing borrowers’ payments: Student Loan Borrowers Are Reporting Huge Spikes In Monthly Payments As Repayment System Buckles
U.S. Senators Wyden and Sanders press release: Wyden, Sanders Blast Trump Administration for Abruptly Freezing All Student Loan Repayment Programs
Letter to Education Secretary Linda McMahon from 25 U.S. Senators led by U.S. Senators Bernie Sanders and Ron Wyden: Re: Trump Administration’s Recent Action To Suspend Access To All Income-Driven Repayment (IDR) Plans
Washington Post article by Danielle Douglas Gabriel on memo to secretly halt servicers’ application processing:It Could Be Months Before Affordable Student Loan Repayment Plans Return
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About Student Borrower Protection Center
Student Borrower Protection Center (SBPC) is a nonprofit organization focused on eliminating the burden of student debt for millions of Americans. We engage in advocacy, policymaking, and litigation strategy to rein in industry abuses, protect borrowers’ rights, and advance racial and economic justice.
Learn more at protectborrowers.org or follow SBPC on Twitter @theSBPC.