Trump to reinstate penalties for defaulted student loan borrowers in 2025 via treasury offset program
Millions of Americans with defaulted student loans are about to face a financial wake-up call. The Trump administration is bringing back aggressive collection tactics — including seizing tax refunds and Social Security checks in a controversial move that could reshape the future of federal loan enforcement.
Starting May 5, 2025, the Trump administration will resume collections on defaulted federal student loans, ending a pause that began in March 2020 due to the COVID-19 pandemic. This includes reinstating the Treasury Offset Program, which allows the government to withhold federal benefits such as tax refunds and Social Security payments from borrowers in default.
Approximately 5 million borrowers are currently in default, with an additional 4 million in late-stage delinquency. The Department of Education plans to notify these borrowers, encouraging them to explore options like loan rehabilitation, which requires nine on-time payments over ten months to return to good standing.
Trump's Loan Collection Plan Faces Backlash as Wage Garnishment Nears
Education Secretary Linda McMahon emphasized that resuming collections promotes financial responsibility and ensures that taxpayers are not burdened by unpaid loans. However, advocacy groups have criticized the move, arguing that it could have harsh economic impacts on vulnerable populations, including seniors and low-income individuals.
Wage garnishment is expected to begin later in the summer, following the required 30-day notice to borrowers. The Department of Education aims to assist borrowers through this transition by offering support services and guiding them toward manageable repayment options.
Trump overhauls student loan system, targets SAVE plan and forgiveness program
The resumption of collections is part of a broader overhaul of the federal student loan system under the Trump administration. This includes efforts to end the Biden-era Saving on a Valuable Education (SAVE) plan and to narrow eligibility for the Public Service Loan Forgiveness program.
Borrowers are advised to act promptly to avoid penalties such as lowered credit scores, loss of federal benefits, and wage garnishment. Contacting the Default Resolution Group and exploring income-driven repayment plans can help mitigate these consequences and provide a path back to financial stability.
