Around 5 million Americans with payment of student loans that failed to pay will be sent loans for collections on May 5, the Department of Education was announced on Monday.
Next month, for the first time since the payment of student loans was packed because of the start of Pandemi Covid-19, the Ministry of Education will collect debts from borrowers who have failed to pay-which means they do not pay their debts for about nine months or 270 days-before Pandemic.
The announcement came as a number of Federal Aid Aid Student employees (FSA) had ended at the Department of Education as part of President Donald Trump’s efforts to close the agency, which created uncertainty for borrowers and the future of the student loan system, according to former Education Secretary James Kvaal.
“His concern is that the department, you know, cut the people who will help the borrower do this transition,” Kvaal told ABC News. “The borrower is trying to get help by entering into an affordable payment plan or by applying for loan forgiveness, if they meet the requirements, you know, it’s just not to have the same resources that they do before the department staff are deducted in two.”
Exterior view of the Ministry of Education Building, March 13, 2025, in Washington, DC
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Pause – Starting in 2020 in Trump’s first government – for all 43 million student loan borrowers was implemented because of economic difficulties and disruption caused by Covid. This will be the first time in five years the payment has begun.
Kvaal says the default can be “tragic” for borrowers. In some cases, said Kvaal, the default could have a negative impact on the credit score and student assistance in the future, and several states revoke the driver’s license more than the default.
However, the department emphasized that its efforts would protect taxpayers from carrying federal student loan costs carried out by borrowers “voluntarily” carried out. Educational Secretary Linda McMahon also said that taxpayers will no longer be responsible for “irresponsible student loan policies” from the previous government.
“Biden government misleads the borrower: The executive branch does not have constitutional authority to remove debts, nor is there a loan balance disappear just like that,” McMahon wrote in a department release. “Hundreds of billions have been transferred to taxpayers. In the future, the Department of Education, along with the Treasury Department, will take the student loan program responsibly and according to law, which means helping borrowers back to payments – both for their own financial health and our country’s economic views.”
Default loans are loans that have not been done by borrowers for 270 days, according to the Federal Student Assistance Office. When the loan officially enters the default, it meets the requirements for a compulsory collection.
Loan collections are usually carried out through wage decoration, legal procedures in which a person’s income is required by a court order to be detained by the employer for debt payments, according to the Department of Manpower.
Student debt can also be collected through tax returns that compensate or other federal allowances, which according to Kval can include a person’s social security. The collection process that begins in just two weeks is to block this borrowing path from the default, according to the Executive Director of the Student Protection Center Mike Pierce. Pierce said Trump’s administration feeded them into “MAW from the government debt collection machine.”
“This is cruel, unnecessary and will further fan the fire of economic chaos for workers’ families throughout this country,” Pierce told ABC News in a statement.
But administrative efforts to place the borrower into an unintentional collection program will be paired with a comprehensive communication and outreach campaign to ensure the borrower understands how to return to payment or exit the default, according to the department’s release.
Students walk at the University of Illinois campus in Urbana-Champaign, February 5, 2025.
Brian Cassella/Chicago Tribune/TNS via Getty Images
The news also came because the administration worked to reject the $ 1.6 trillion student loan portfolio to other institutions. Trump announced that the loan system would be moved to the small business administration “immediately” during the White House event last month.
After the announcement, Kval, who worked in the role of senior in the administration of Obama and Biden, told ABC News Higher Education Portfolio under Obama including moving several loan functions to the Ministry of Finance. But he warned of shifting the student loan portfolio can cause real world consequences.
“We are at the current point where millions of borrowers are late with their student loans,” he said. “So that the department focuses on stopping half of its staff and through a fundamental reorganization of how he manages these programs, you know, in a very critical week for borrowers who try to enter the payment plan or get loan amazing, I think it is very dangerous and the risk of millions of borrowers who default on their loans.”