(Image Credit: IMAGN) President Donald Trump speaks on the environment at and event at the Jupiter Inlet Lighthouse and Museum, Tuesday, Sept. 8, 2020, in Jupiter, Florida. (Greg Lovett /palmbeachpost.com]
Washington D.C. – Millions of student loan borrowers are facing new financial threats as the Trump administration officially restarts collections on defaulted loans, ending a five-year pause that began in 2020. The move, announced Monday, marks a dramatic shift in federal policy that had, until now, shielded struggling borrowers from wage garnishment, tax refund seizures, and other punitive measures.
Roughly 5 million Americans are already in default on their student loans, with an additional 4 million in late-stage delinquency. That means nearly 10 million borrowers could be on the brink of serious financial consequences this summer, all under the renewed guidance of the Department of Education and Department of Treasury.
“The relief is over. Now it’s pay up or face the consequences,” said Preston Cooper, a senior fellow at the American Enterprise Institute, a conservative think tank. Borrowers who don’t resume payments could see portions of their paychecks or Social Security benefits garnished, or even lose their annual tax refunds. Notices of intent to garnish wages are expected to go out later this summer.
This policy reversal comes amid broader upheaval for student loan borrowers. The Department of Education has paused processing new income-driven repayment plans, and President Trump has publicly supported dismantling the agency altogether. Amid legal challenges and administrative confusion, many borrowers were not expecting a sudden return to aggressive collections.
Critics say the restart is not just poorly timed — it’s punitive. “This feels like a punishment for pursuing higher education,” said Sara Partridge of the Center for American Progress. “It’s hitting people who are already struggling, with very little warning. The harm could be deep and long-lasting.”
Indeed, defaulting on a student loan can damage credit scores, making it harder to qualify for housing or transportation, or raising the cost of existing loans. Garnishing Social Security checks or wages only adds to the economic strain. Many borrowers may not even be aware they’re at risk. “There was no real effort to prepare people,” Cooper admitted.
To escape default, borrowers must either rehabilitate their loans by making nine on-time payments or consolidate them into a new loan and enroll in an income-driven plan. But both options require navigating a confusing, overloaded system — one that has done little to help during the transition.
