This week the US Department of Education announced it would resume “involuntary repayment” on the 5.3 million Americans whose federal student loans were in default prior to the Pandemic.  

What this means for borrowers in default according to the Department of Education in a press release; “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 has indicated it will send notices of wage garnishment allowing up to up to 15% of a borrower's disposable income to be taken "later this summer." 

The department is encouraging all defaulted borrowers and those nearing default who may be late, past due or in collection to begin making monthly payments or enroll in an income-driven repayment plan to meet their obligation. All impacted borrowers will receive communication from the department by May 5 reminding them of their student loan obligation and to provide support in resuming repayment. 

What can borrowers do now to find out if they are at risk of default or will be subject to involuntary repayment??  

• Borrowers can check their loan status by logging in to StudentAid.gov  
• Verify loan status 
• Obtain servicer information  
• Defaulted borrowers will see an urgent message regarding their account statuses 

• Any borrower who has not made payments since loan repayment resumed in October 2023 must take action steps to make payment arrangements with their loan servicer or will be subject to involuntary repayment when they become defaulted once they hit 270 days past due 

• All borrowers should verify email and mailing addresses to be sure they are receiving loan correspondence 

• Borrowers still receiving billing or other communications from loan servicers are not considered in default and should take action 

• Do not ignore communications from loan servicers, lenders, or government entities regarding student loans. 

What can defaulted borrowers do? 

Defaulted borrowers are those borrowers who have failed to make a loan payment for at least 270 days. Borrowers should verify their default status by logging in to StudentAid.gov and contact the default resolution group at Federal Student Aid. Borrowers should keep copies of all communications and payments made. There are three ways to clear defaults.   

• Pay total debt including principal, interest, and fees in full  

• Loan consolidation which will create a new loan to payoff existing debt and allow for new loan to enter repayment (but default will remain on borrower’s credit report/history) 

• Complete default loan rehabilitation which requires borrower to make 9 consecutive (income based) on time payments. Completion of the rehabilitation plan will then take the loan out of default, remove it from the credit report and allow the borrower to resume repayment.  

Federal student loans are the obligation of the borrower to repay. To avoid default, it is important for borrowers to be certain that information is updated for loan servicers to be able to communicate with them. There are many options available to borrowers including varied payment options, the ability to pause payments for hardship or return to school. It is important that borrowers communicate with loan servicers.