Federal Student Loan Collections Set to Resume: Millions of Borrowers Face Potential Wage Garnishment

In a significant policy reversal announced today, the Trump administration will resume federal student loan collections beginning May 5, 2025, ending a payment pause that has been in effect since the early days of the COVID-19 pandemic. The announcement, delivered by White House Press Secretary Karoline Leavitt, has serious implications for the approximately 5.3 million borrowers currently in default.

Student Loan Collections: What's Changing

Starting May 5, the Department of Education will restart collection activities on defaulted federal student loans. Borrowers will have just two weeks to take action before facing potentially severe consequences:

• Wage garnishment

• Withholding of tax refunds

• Seizure of federal salaries

• Potential reductions in Social Security benefits

"President Trump is immediately reversing the Biden policy to pay for student loans, and the Department of Education will resume collections on May 5," Leavitt stated during a press briefing today.

A Brief History of Student Loan Pauses

The federal student loan payment pause began in March 2020 under then-President Trump as a pandemic relief measure. The Biden administration extended this pause multiple times before payments finally resumed in October 2024. Biden's administration also implemented various forgiveness programs that erased debt for over 5 million borrowers, though broader forgiveness attempts were blocked by the Supreme Court in 2023.

Current State of Student Loan Repayment

According to the Education Department, the $1.6 trillion federal student loan portfolio affects 42.7 million Americans. Currently:

• Only 38% of borrowers are making payments

• Nearly 35% are more than 60 days past due

• 1.9 million borrowers remain in forbearance awaiting processing of income-driven repayment applications

Bigger Picture: Restructuring Education Policy

This announcement comes amid broader efforts by the Trump administration to reshape federal education policy. In March 2025, Trump proposed transferring oversight of federal student loans from the Department of Education to the Small Business Administration (SBA), a move that has been criticized as potentially requiring Congressional approval.

Education Secretary Linda McMahon defended the policy shift, stating, "American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies."

Economic Implications

Economists warn that the resumption of collections could have far-reaching economic consequences. According to 2024 data:

• 51% of student borrowers report being unable to buy homes due to student debt

• 18% of borrowers struggle to afford daily necessities

• Student loan debt already reduces consumer spending and hampers small business growth

Some economic analysts have compared the current student loan situation to the housing bubble that contributed to the 2007-2009 recession.

What Borrowers Can Do

With the May 5 deadline approaching quickly, the Education Department has promised a "comprehensive communications and outreach campaign" to help affected borrowers. Those in default should consider:

• Enrolling in income-driven repayment plans

• Applying for loan rehabilitation programs

• Contacting their loan servicers immediately to understand their options

Divided Public Response

The announcement has generated intense reactions across political lines. Advocacy groups like the Student Borrower Protection Center have criticized the timing, with Policy Director Aissa Canchola Bañez stating, "This could not have come at a worse time for millions of Americans who are already navigating incredible economic uncertainty."

Supporters of the move argue that it relieves taxpayers who never attended college from subsidizing student loans.

As the deadline approaches, millions of borrowers will need to take immediate action or face significant financial penalties. For a student loan system that many already consider fundamentally broken, this policy shift marks yet another pivotal moment in America's ongoing debate about higher education financing and accessibility.