Federal Student Loan Collections Resume

For the first time since March 2020, the Department of Education will be collecting on defaulted student loans beginning on May 5, 2025.

The office of Federal Student Aid (FSA) will encourage borrowers to begin making monthly payments, enroll in an income-driven repayment plan, or pursue loan rehabilitation. The FSA is also restarting its Treasury Offset program, which can involuntarily collect on overdue student loan payments, including garnishing wages and tax refunds, and seize portions of Social Security and other benefit payments.

According to the office, borrowers will receive communications urging them to contact the Default Resolution Group for assistance, and will also receive collection notices before any action is taken.

Per the FSA’s policy on the collection of student loans, wage garnishment is when your loan holder can order your employer to withhold up to 15 percent of your disposable pay to collect your defaulted debt without taking you to court.

The Treasury Offset Program can withhold up to 100% of federal tax refunds, up to 15% of federal salaries, up to 15% of Social Security and Railroad Retirement benefits, up to 25% of federal retirement payments, 100% of payments to vendors, and 100% of travel payments for federal employees.

In addition to paying the debt in full or making a valid objection, the FSA says borrowers, depending on their eligibility, can apply for any of the following repayment options to avoid offset: