The U.S. Department of Education has resumed collecting student loan payments as of Monday, ending a pause that began in March 2020 due to the COVID-19 pandemic. This move affects nearly 43 million borrowers, many of whom are grappling with the reality of repayment after three years of relief.
During the pandemic, federal student loan payments and interest accrual were temporarily halted to provide financial respite. But with collections restarting, borrowers who are in default may face serious consequences, including wage garnishment and the withholding of tax refunds and government benefits.
“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” said U.S. Secretary of Education Miguel Cardona in a statement announcing the resumption of collections. The Department has indicated that notices about wage garnishment will be sent out later this year.
The impact is significant: according to a recent analysis by TransUnion, a major credit bureau, one in five borrowers is “seriously delinquent” or has a past-due payment of 90 days or more. Defaulting on loans can severely damage credit scores, making future borrowing more difficult.
“The level of concern here really depends on the reasons a borrower has not paid their federal student loans,” said Michele Raneri, vice president and head of research at TransUnion. “They may be overstretched, may not know they have to pay them, or may not have the willingness to pay for one reason or another.”
Advocates warn that many borrowers are still struggling with the economic fallout of the pandemic, along with rising inflation and living costs. “We’re in the worst student loan landscape that we’ve ever been in before,” said Sabrina Calazans, executive director of the Student Debt Crisis Center, a nonprofit advocating for student debt cancellation. “It’s going to create a financial catastrophe where folks will not be able to meet their basic needs.”
Borrowers are encouraged to explore repayment options, such as income-driven repayment plans, to manage their debt. Financial advisors also recommend reaching out to loan servicers to discuss possible solutions before defaulting.
