The Department of Education announced Monday that it will resume collections on student loan debt next month, including by garnishing the wages of borrowers in default.
Collections, which have been paused since March 2020, will resume on May 5 and are expected to impact roughly 5.3 million borrowers currently in default on their federal student loans.
“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” Education Secretary Linda McMahon said in a statement.
The education secretary went on to criticize former President Joe Biden’s efforts to cancel billions of dollars in student loan debt, several of which were blocked by federal courts.
“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,” McMahon said.
“Hundreds of billions have already been transferred to taxpayers. Going forward, the Department of Education, in conjunction with the Department of Treasury, will shepherd the student loan program responsibly and according to the law, which means helping borrowers return to repayment — both for the sake of their own financial health and our nation’s economic outlook.”
Some 42.7 million borrowers who owe more than $1.6 trillion in student debt are pushing the nation’s federal student loan portfolio toward a “fiscal cliff,” the Education Department argued.
The agency noted that more than 5 million borrowers have not made a single monthly payment in over 360 days and “many” haven’t in “more than 7 years.”
“As a result, there could be almost 10 million borrowers in default in a few months,” the DOE said. “When this happens, almost 25% of the federal student loan portfolio will be in default.”
“Only 38% of borrowers are in repayment and current on their student loans,” according to the department.
The move to send debt to collections was criticized by advocates for student loan forgiveness, who said it will throw millions of people into the “jaws of [the] government collections machine.”
“This is cruel, unnecessary and will further fan the flames of economic chaos for working families across this country,” Mike Pierce, executive director of the Student Borrower Protection Center, said in a statement.
The Education Department maintains that it is committed to putting both borrowers in default and those who are current “on a productive path toward repaying their federal student loans.”
“Over the next two months, [Office of Federal Student Aid] will conduct a robust communications campaign to engage all borrowers on the importance of repayment,” the Education Department said. “FSA will conduct outreach to borrowers through emails and social media reminding them of their obligations and providing resources and support to assist them in selecting the best repayment plan.”
“FSA intends to enlist its partners – states, institutions of higher education, financial aid administrators, college access and success organizations, third-party servicers, and other stakeholders – to assist in this campaign to restore commonsense and fairness with the message: student and parent borrowers – not taxpayers – must repay their student loans,” the department added, while noting, ”There will not be any mass loan forgiveness.”
“Together, these actions will move the federal student loan portfolio back into repayment, which benefits borrowers and taxpayers alike.”
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