Involuntary collection of defaulted student loans to resume, Education Department says

The U.S. Department of Education on Monday said it's restarting "involuntary" repayment of federal student loans that are in default.

The payments were paused during the first term of President Donald Trump in 2020 as a response to the Covid pandemic.

"Beginning May 5, the department will begin involuntary collection through the Treasury Department’s offset program, which withholds payments from the government — including tax refunds, federal salaries and other benefits — from people with past-due debts to the government," the department said in a statement.

Wages will be garnished following a 30-day warning, it added.

An estimated 8.3 million borrowers are in default on their federal student loans, though the department said that number could reach 10 million in a few months. Repayment will be administered by the U.S. Department of Treasury, and affected borrowers will get notices in the next two weeks, the department said in a statement.

The administration of President Joe Biden continued to pause repayment under a campaign promise to relieve student debt, but the U.S. Supreme Court ruled in 2023 his plan was not constitutional because it did not fall under congressional approval.

“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” said U.S. Secretary of Education Linda McMahon. “The Biden Administration misled borrowers: the executive branch does not have the constitutional authority to wipe debt away, nor do the loan balances simply disappear."

https://www.nbcnews.com/news/us-news/involuntary-collection-defaulted-student-loans-resume-education-depart-rcna202270

(http://www.autoadmit.com/thread.php?thread_id=5714160&forum_id=2#48867998)

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was the primary federal response to the pandemic.

2. Silicon Valley Bank (SVB) & Signature Bank Collapses – March 2023

FDIC, Fed, and Treasury invoked a "systemic risk exception"

Guaranteed all deposits (even uninsured ones above $250k)

Fed launched Bank Term Funding Program (BTFP) to shore up liquidity

(http://www.autoadmit.com/thread.php?thread_id=5714160&forum_id=2#48868523)

1, you seriously think we should've let all businesses just simultaneously go bankrupt during covid? it would've been worse than the great depression

2, this is borderline, and i totally get criticizing bailing out uninsured accounts over $250k. but there is real contagion/community risk to a run on banks/bank failure that would hurt, eg, student loan borrowers badly as well as the rich, and maybe moreso due to poors living paycheck to paycheck

(http://www.autoadmit.com/thread.php?thread_id=5714160&forum_id=2#48868732)

2. no there wasnt. SVB was basically for PE/VC owned companies (my PE client had a portfolio company that had a SVB bank account). it was a giveaway to them. again, they dont have to deal with the financial consquences of their decision. hell, make the shareholders of any company that got bailed out by SVB sign a 10 year agreement of no dividends/buy backs to shareholders. but of course not

(http://www.autoadmit.com/thread.php?thread_id=5714160&forum_id=2#48868947)

Linda McMahon: Accountability Returns to Student Loans

We’re ending a Covid-era deferment plan that Biden kept in place far too long.

By

Linda McMahon

Updated April 21, 2025 4:08 pm ET

President Biden never had the authority to forgive student loans across the board, as the Supreme Court held in 2023. But for political gain, he dangled the carrot of loan forgiveness in front of young voters, among other things by keeping in place a temporary Covid-era deferment program. Thus the Education Department allowed students to rack up a massive debt that is now long past due.

Between 2021 and 2024, federal student-loan debt increased by more than $60 billion a year, while the department manipulated repayment plans and forgiveness policies until only 38% of the student-loan portfolio was in repayment. This is unsustainable for both students and taxpayers.

I am announcing the end of this dishonest and irresponsible policy. We will conform the department’s repayment options to federal court decisions and end the Biden-era practice of zero-interest, zero-accountability forbearances that are pushing borrowers into loan delinquency and default. On May 5, we will begin the process of moving roughly 1.8 million borrowers into repayment plans and restart collections of loans in default. Borrowers who don’t make payments on time will see their credit scores go down, and in some cases their wages automatically garnished.

Why? Not because we want to be unkind to student borrowers. Borrowing money and failing to pay it back isn’t a victimless offense. Debt doesn’t go away; it gets transferred to others. If borrowers don’t pay their debts to the government, taxpayers do.

Student loans must always be paid back because they are unlike other types of consumer loans. If a borrower stops paying a mortgage or a car payment, he will go into foreclosure or find his car repossessed. Student loans have no collateral. It is impossible to repossess a college degree. That’s why they are very rarely discharged even in bankruptcy.

That’s the hard truth for borrowers. But I have another hard truth for the institutions that made empty promises to students while pocketing their loan dollars.

Colleges and universities call themselves nonprofits, but for years they have profited massively off the federal subsidy of loans, hiking tuition and piling up multibillion-dollar endowments while students graduate six figures in the red. A widely cited 2015 study found that for every dollar of increased federal caps on subsidized loans, colleges raised tuition by 60 cents.

Many of the degree-granting programs that qualify for student loans are worthless on the job market, but colleges continue to accept students to these programs and encourage them to borrow to pay for them. Accountability is a two-way street. As we push to hold student borrowers to account, we will also push colleges to be responsible and transparent.

If you are a student borrower with a federal loan balance and haven’t been making payments, you must restart payments now. Our Federal Student Aid office is providing every form of assistance we legally can to ensure that a monthly payment can fit into your budget. We recently extended the FSA call-center operations with weekend hours to ensure that your individual questions can be answered. We are updating the loan simulator to help calculate your easiest repayment plan. We also provide an advanced AI assistant, Aidan, to help pinpoint your best financial strategy.

As we plan for the department’s future, we won’t leave the loan portfolio in disarray. We are committed to ensuring that borrowers are paying back their loans, that they are fully supported in doing so, and that colleges can’t create such a massive liability for students and their families, jeopardizing their ability to achieve the American dream.

Ms. McMahon is U.S. education secretary.

https://www.wsj.com/opinion/accountability-returns-to-student-loans-forgiveness-borrower-debt-payment-9508da8d

(http://www.autoadmit.com/thread.php?thread_id=5714160&forum_id=2#48868038)

Ever tried repossessing a vacation, a meal, a massage, a night at the bar, or a concert ticket? No? And yet loans are made for things like that millions of times each day.

There are arguments to be made, but the repossession argument is among the dumbest there is.

(http://www.autoadmit.com/thread.php?thread_id=5714160&forum_id=2#48868461)

he went an entire presidency trying to discharge loans and coddle borrowers

as if we are to believe biden would not have extended his theft on american taxpayers to the benefit of his shitlib army of college deadbeats

(http://www.autoadmit.com/thread.php?thread_id=5714160&forum_id=2#48868249)

Tariffs to increase everyone’s costs, will likely lead to tight job market especially with AI making it easier not to backfill

Squeezing spending more by garnishing paychecks and restarting a bunch of debt payments

Great recipe for a good economy…

(http://www.autoadmit.com/thread.php?thread_id=5714160&forum_id=2#48868209)

https://www.yahoo.com/news/trump-sends-desperate-message-farmers-182618755.html

(http://www.autoadmit.com/thread.php?thread_id=5714160&forum_id=2#48868753)