Students with loans currently in default could face significant consequences now that President Donald Trump’s administration has announced an end to payment deferrals.
This shift in policy affects millions of borrowers who have been protected from collection actions since the COVID-19 pandemic.
What’s changing for defaulted student loans
The Trump administration has announced that nearly 5 million Americans with student loans in default will need to resume payments soon. Beginning May 5, collection activities will restart for all loans in default, ending a five-year pause on these measures.
Secretary of Education Linda McMahon stated that “American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” signaling a significant shift in the federal approach to student debt management.
What this means for borrowers
For those with defaulted loans, the consequences could be severe. When the policy takes effect, defaulted loans will be sent to the Department of the Treasury for collection. Borrowers who don’t resume timely payments may face:
- Wage garnishment
- Withholding of Social Security benefits
- Seizure of tax refunds
This change comes at a challenging economic time when many Americans are living paycheck to paycheck, financial markets remain volatile, and recession risks loom large.
The scope of the student debt crisis
The resumption of collection activities affects a significant portion of the more than 40 million Americans carrying student loan debt. Overall student loan debt exceeded $1.6 trillion in 2024 — a 42% increase from just a decade ago.
The burden has grown increasingly difficult to manage as college costs have skyrocketed. In 1975, annual tuition, room, and board at four-year universities averaged $2,187. By 2023, that figure had jumped to more than $30,000.
Options for borrowers in default
If your loans are currently in default, you have several options to avoid the harshest collection measures:
- Contact your loan servicer immediately to discuss your situation.
- Consider a loan rehabilitation plan, which allows you to make nine months of agreed-upon payments to bring your loan out of default.
- Provide documentation of your income and monthly expenses to determine affordable payment amounts.
- Explore income-driven repayment plans if you successfully rehabilitate your loans.
Taking action before collections resume
With the May 5 deadline approaching quickly, here are immediate steps defaulted borrowers should take:
- Determine your current loan status by logging into StudentAid.gov or contacting your loan servicer.
- Gather documentation of your financial situation, including income statements and major expenses.
- Reach out to your loan servicer to discuss rehabilitation options before collection begins.
The end of the student loan payment pause for defaulted borrowers represents a major shift in federal policy that will affect millions of Americans. By understanding the changes and taking proactive steps now, borrowers can potentially avoid the most severe consequences of default and work toward getting their loans back in good standing.
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