Over 5.3 million borrowers are officially on the clock. Starting May 5, 2025, the U.S. Department of Education will restart debt collection on student loans that have been in default. If you’ve missed payments for more than 270 days, you could soon face wage garnishment, tax refund seizures, and even federal benefit offsets.
This is the first time since the COVID-19 pause that collections will be enforced. For many, it’s a wake-up call, one that hits your finances hard if you don’t act fast.
What’s Changing?
On May 5, all defaulted federal student loans will be eligible for debt collection again. This means:
- Wages can be garnished without court approval.
- Tax refunds and Social Security benefits may be seized.
- Credit scores will take a hit, impacting your ability to rent, finance a car, or get approved for new credit.
The government says the move is about holding borrowers accountable, but critics argue it’s poor timing, especially during a time of economic uncertainty and job market flux.
What You Can Do to Avoid Debt Collection on Student Loans
Here’s how to stay ahead of the deadline:
- Check your status: Go to StudentAid.gov and sign in with your FSA ID. Confirm whether your loans are in default.
- Explore Fresh Start: This federal program offers a one-time chance to pull loans out of default, clean up your credit, and restore eligibility for future aid.
- Call your servicer: Get on an income-driven repayment plan or apply for loan rehabilitation. It can bring your monthly payment to as low as $0, depending on your income.
- Start making small payments now: It shows good faith and might count toward rehabilitation or other arrangements.
Why This Matters
Ignoring your loans now could lead to aggressive debt collection actions. Once in collections, you lose eligibility for deferment, forbearance, and new federal aid. In some states, even your driver’s license could be affected.
The Education Department says it will ramp up outreach, but the burden is on you to take the first step before collection kicks in.
If you’ve defaulted, May 5 is the hard deadline to make a move. Don’t wait for wage garnishments or IRS offsets to kick in. Take control now, because once collections start, the options narrow fast.
