The Trump administration is restarting collections on defaulted federal student loans beginning Monday, May 5, targeting more than five million borrowers who haven’t made payments in months — or, in some cases, years.
Many of those borrowers now face aggressive consequences: wage garnishment, loss of tax refunds, and cuts to Social Security benefits. These measures, paused during the pandemic, are returning in full force as the Department of Education reactivates pre-2020 collection protocols.
The move reverses the more lenient Biden-era approach, which included a long-running payment pause and a post-pandemic “on-ramp” that shielded borrowers from immediate penalties. The Trump team, by contrast, says it lacks the legal authority to forgive the loans — and that enforcement must resume.
As of 2025, total outstanding federal student loan debt in the U.S. stands at approximately $1.7 trillion, owed by more than 40 million borrowers. Over 5 million are currently in default.
Monthly student loan payments vary based on loan type and repayment plan. According to Federal Reserve data, the average ranges between $300 and $500 — but can be much higher for borrowers with large balances or those not enrolled in income-driven plans.
For those already in default, the numbers can get worse: collection fees can swallow nearly 20% of each payment or add up to 25% to the total balance. The Department of Education can also garnish up to 15% of disposable income, intercept tax refunds, and seize Social Security benefits through the Treasury Offset Program.
The timing couldn’t be worse. Millions of Americans had reorganized their budgets during the multi-year payment pause — and many didn’t realize they were expected to start repaying again.
“It’s a substantial additional cost,” said Rikard Bandebo, chief economist at VantageScore. “People… are going to have to make harder choices on what they spend on.”
Airplane mechanic Loren Linton, 51, told the Wall Street Journal that his credit score dropped by nearly 300 points in March, which was how he discovered his automatic payments had stopped due to a glitch. He’s since picked up extra overtime hours to manage the debt, especially with two children starting college this fall.
“This was supposed to improve our lives,” he said. “Not bring it down.”
Borrowers who haven’t made a payment in nine months are now considered in default. Many will begin receiving collection notices this week, with garnishments potentially starting as soon as early June.
The broader economic backdrop only compounds the strain: new jobs are harder to come by, wages have plateaued, and consumer spending remains fragile. According to Conference Board data, 72% of U.S. consumers now believe a recession is “somewhat” or “very likely” in the next 12 months — the highest in two years. That’s an 8-point jump since November and a sign of the growing disconnect between Wall Street’s rally and Main Street’s dread.
Consumers report worsening views of their family finances, inflation fatigue, rising borrowing costs, and an abundance of layoff headlines.
While these student-loan collection measures reflect a return to pre-pandemic norms, the emotional and financial toll for many borrowers — especially those who had hoped for cancellation — is anything but normal.
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