Student Loan Collections Resume May 5: What Borrowers in Default Need to Know

the staff of the Ridgewood blog

Ridgewood NJ, the U.S. Department of Education has officially announced the resumption of involuntary collections on defaulted federal student loans beginning May 5, 2025, marking the end of a five-year pandemic-related pause.

This change comes as millions of borrowers face renewed financial pressure, and signals a return to aggressive collection tactics for those who remain in loan default.

What’s Changing?

For the first time since early 2020, the government will resume:

• Tax refund garnishment

• Wage garnishment (following a 30-day notice)

• Deductions from federal salaries and Social Security benefits

These actions fall under the Treasury Offset Program, aimed at recovering overdue payments on defaulted loans.

Who Will Be Affected?

• ✅ 5+ million borrowers are currently in default

• ✅ 4 million borrowers are behind on payments

• ✅ Only about one-third of 38 million total federal student loan borrowers are actively making payments

Borrowers impacted by the change will begin receiving notifications within two weeks, with wage garnishments expected to begin 30 days after notice is served.

How to Prepare

If you’re in default, here are some steps to consider:

1. Check your loan status via studentaid.gov

2. Explore loan rehabilitation or consolidation options

3. Speak with a student loan advisor or financial counselor

4. Respond promptly to any notices from the Department of Education or loan servicers

Harvard Lawsuit Adds Pressure to Education Policy Landscape

In a separate but related development, Harvard University filed a lawsuit against the Trump administration after the government withheld over $2.2 billion in grants and $60 million in contracts. The move is reportedly part of a push to compel Harvard to comply with federal policy reforms—potentially signaling a broader shift in how institutions are held accountable for federal funding.

Final Thoughts

With involuntary student loan collections returning in May, now is the time for borrowers to act. Whether you’re already in default or falling behind, getting ahead of the curve can help minimize financial impact and protect your future tax refunds and wages.