After the COVID-19 pandemic, the Biden administration froze student loan payments for millions of borrowers. Now, those payments are poised to resume for millions of borrowers who defaulted during the pandemic.
The move marks a significant shift in federal policy that may impact borrowers’ debt. Here’s what you need to know.
Restarting Collections on Defaulted Student Loans
The Trump administration is preparing to resume collections on millions of federal student loan borrowers who are in default. That could mean that the government can take funds from borrowers’ tax refunds, Social Security checks, and, eventually, wages. The move is likely to cause anxiety among families who already face harsh economic conditions, as tariffs have raised the prices of everything from cereal to cars.
The Education Department plans to send emails to borrowers in default in the next few weeks, requesting that they make a payment, enroll in an income-driven repayment plan, or sign up for loan rehabilitation. The agency states that it will also expand its call center hours on weekends and weeknights to assist borrowers in navigating the system.
However, borrowers should expect harsh collection efforts, experts say. They’re likely to be slapped with higher interest rates, which can quickly double or triple a balance. They should also prepare themselves for a potential impact on their credit scores, which may make it more challenging to qualify for credit and other loans.
Borrowers must make payments to keep their loans out of default, says Nicole Banez, an adviser to the Education Department’s Office of Federal Student Aid. Otherwise, they’ll see their credit scores drop and could be hit with wage garnishment, which can devastate working families.
Forgiveness of Student Loans for Borrowers Whose Balances Have Grown Due to Interest
As Donald Trump cuts federal programs and wages a haphazard trade war, many families are already feeling the squeeze. Add to that the resumed collection of student loans in default and the Education Department’s move to rescind forgiveness of debt for those who work in public service or borrower defense, and you get a recipe for financial pain for millions of Americans.
While the Education Department revoked Biden’s plan for broad loan cancellation, it did make clear that the upcoming Trump administration will still honor its previous commitment to debt relief. That includes repayment plans like SAVE and other income-driven options, as well as Public Service Loan Forgiveness, which forgives balances for individuals who spend 10 years working for the government or in nonprofit organizations.
NPR spoke with experts to determine how this reversal could affect borrowers who have been relying on these benefits and what steps they should take moving forward.
For borrowers in these programs, the good news is that payment collections won’t resume until April 5. However, if they miss payments or fall into late-stage delinquency, collection activities will resume, including wage garnishment and withholding of Social Security and tax refunds. Borrowers should contact their loan servicers for updates on their status. They should also submit the 2025-26 FAFSA, which is due on November 18. 18. That’s the best way to ensure they’re able to access the aid that’s right for them, Thompson says.
Forgiveness of Student Loans for Borrowers Whose Degrees Didn’t Provide “Sufficient Value”
At a time when millions of Americans live paycheck to paycheck, financial markets are volatile, and recession risks loom large, this policy seems particularly reckless. It will put even more pressure on families with student debt, many of whom are already struggling. Families may see money from their paycheck or Social Security checks disappear as collections resume, at a time when higher prices are due to tariffs and inflation is looming.
The Trump administration has made no secret of its disdain for the Obama-era policies that provided broader student loan relief. While the administration has continued to cancel debt on a smaller scale, the most significant efforts to offer more widespread relief have been stymied by Republican legal challenges.
In 2023, for example, the Obama administration introduced a new income-based repayment plan, known as SAVE, which would enable borrowers to cap their monthly payments at 5 percent of their discretionary income. The plan was a response to a Supreme Court decision that had halted another Biden-era forgiveness program.
But the SAVE plan was ultimately ruled unconstitutional by a federal appeals court, and the Education Department has since rolled back some of the changes made to that program. As a result, the number of borrowers who qualify for loan forgiveness under SAVE will decrease significantly, with some individuals becoming ineligible for loan forgiveness after a specific period.
Forgiveness of Student Loans for Borrowers Whose Degrees Left Them Unemployed
The Education Department will restart collecting on federal student loans in default beginning Monday. The program paused during the pandemic as a way to give borrowers time to find employment or explore alternative repayment options. The government will use its offset program, which withholds tax refunds and garnishes wages for those who owe debt to the federal government.
Earlier this year, the Trump administration proposed a significant change to loan forgiveness programs that could impact 42 million borrowers. The Heritage Foundation, which helped shape the plan known as Project 2025, recommends transferring the management of old loans from the Education Department to the Treasury Department, where it would oversee defaults and collections.
But such a move, which requires congressional approval, faces an uphill battle in the Senate, where it would have to gain bipartisan support, according to analysts. The plan would also likely impose massive costs on taxpayers, who currently cover the cost of federal student aid for low-income students.
The proposal also represents a reversal from the Obama administration, which introduced new repayment plans that reduced monthly payments and ultimately led to loan forgiveness for some borrowers. But those plans, based on income and family size, have already faced legal challenges. The Trump administration has also made changes and rescinded other borrower repayment plans, including the popular Public Service Loan Forgiveness program that cancels debt after a decade of payments.
