This week, the Department of Education announced that it plans to begin forced collection on federal student loans that are in default as soon as May 5, 2025. That means it will begin seizing money from some borrower’s tax refunds, Social Security benefits, and – later this year – paychecks.
Starting forced collections will be a big change: collection has been paused for most borrowers since March 2020. And with more than 5 million people currently in default and thus at risk of forced collections, a huge number of people across the country stand to suddenly see a big hit to their pocketbooks.
The government only uses forced collection against loans that are in default. Loans generally default after 270 days of missed payments. However, during pandemic payment pause and other temporary relief programs in effect from 2020 until 2024, most collections were paused and missed payments generally did not put loans closer to defaulting. As of now, 5.3 million people have federal student loans in default, and another 4 million are at risk of defaulting later this year.
But there are things borrowers can do to protect themselves. Below, we share what we know about the government’s plans to begin forced collections. Then we walk through options borrowers have to protect themselves against forced collections and to manage their student loan debt.
The Government’s Plan To Begin Collection of Defaulted Student Loans
The Department’s announcement says that it plans to start forced collection using the Treasury Offset Program beginning May 5, 2025. It says it will not begin garnishing paychecks until after sending out garnishment notices “later this summer.” When it does, it can seize up to 15% of borrowers’ paychecks to pay off federal student loans in default.
The Treasury Offset Program takes money from tax refunds and certain government benefits (the biggest being Social Security retirement and disability benefits) to collect on defaulted debts owed to the federal government.
- Tax refund seizures: The government can seize a borrower’s whole federal tax refund (and, in some states, their state refund) to collect on a defaulted federal student loan. The only limit is that the government can’t seize more than the total amount of the debt. The government can only seize a tax refund that hasn’t yet been sent to the taxpayer – if you’ve already gotten your refund this year, then you should not be at risk of any tax refund seizure until 2026.
- Social Security seizures: The government can take up to 15% of monthly Social Security retirement and disability benefits to collect on a defaulted federal student loan. In January, the Biden Administration announced that to prevent student loans from pushing people into poverty, it would protect 150% of the federal poverty level (about $1,883 / month) in Social Security benefits from seizure. But we do not yet know if the Trump Administration will honor that commitment to protecting Social Security benefits.
We do not yet know if the government will begin seizing tax refunds and Social Security benefits immediately on May 5, or if borrowers will have a couple more months before that happens. Generally, the Department must provide notice that it is going to start forced collection against a borrower and provide them time to object or remove their loans from default. Under the Biden Administration, the Department said that it would provide legal notices to borrowers already in default and would not begin seizing tax refunds or Social Security benefits for at least two months until after the notices had been sent. But the Trump Administration has not said whether it will do this, so it is unclear whether the government is going to provide notice and the opportunity to object to all borrowers before collecting, or whether it will only provide notice to those who are newly in default and were not subject to collections before the COVID-19 payment pause began.
Regardless, for borrowers in default who have not yet received their tax refunds this year, or who rely on Social Security benefits, acting fast is the best way to protect these payments from being seized.
What Borrowers Can Do To Protect Themselves
1. Find Out if You Have Student Loans in Default
The first step to protecting yourself against forced collections is to figure out if you have any federal student loans in default. The best way to do this is to log into your account on the Federal Student Aid website, studentaid.gov. There you’ll find a dashboard with your loan information, including how much you owe and the status of your loans (in repayment, grace period, forbearance, deferment, delinquent, or in default). If you’re in default, you may also see a warning that says so at the top of your account dashboard. For more about understanding your loan information, see here.
If your loans are currently in default, you may face collections as soon as May. And if your loans are delinquent, they may default after 270 days of delinquency.
Federal student loans become delinquent after a missed payment. After 3 months of missed payments, the delinquency is reported on your credit reports. Then, after 9 months of missed payments, loans go into default. However, you have options when your loans are delinquent that will prevent them from going into default. You should consider using forbearances or deferments to bring your loans current and you can apply for an IDR plan to make payments more affordable in the future.
The Department of Education said that it would be emailing borrowers in default over the next couple weeks. But don’t rely on receiving an email – the Department does not have email addresses or other contact information for all borrowers in default. (To update your contact information, go to studentaid.gov and update it there AND contact your loan servicer to update your contact information with them.)
Share Your Story: Many borrowers are doing their best but find themselves in default when they can’t afford student loan payments following a medical issue, job loss, divorce, or withdrawing from school, and aren’t told about options to reduce or postpone payments. Share your story about how you wound up in default or how default has impacted you.
2. Figure Out if You Are Expecting Payments That Could Be Seized
Your situation will be most urgent if your loans are already in default AND if you are expecting to receive the type of payments that the government may begin seizing first. The most common payment types that could be seized first are:
- Social Security: If you receive Social Security disability or retirement benefits, those may be at risk of partial seizure soon. That’s a good reason to act now. (Supplemental Security Income, or SSI, is protected from seizure.)
- Tax refunds:
- If you have filed your taxes and are expecting a refund that you haven’t received yet, that refund could be at risk of seizure – a good reason to act now.
- Similarly, if you haven’t yet filed your taxes this year and expect a refund when you do, that refund could be at risk of seizure. You might consider requesting an extension and waiting to file until after you have addressed your loan default.
- On the other hand, if you have already received your tax refund this year, or aren’t due a refund, then you are not at immediate risk of having your refund seized. What you’ve already received is safe. It wouldn’t be until when you file taxes next year that you would face tax refund seizure.
If you are not expecting a tax refund or Social Security payment, then you should have more time to address your loan default before wage garnishments begin later this year.
3. Consider Options to Discharge (Cancel) Your Student Debt
If you have a federal student loan in default, you should consider whether it’s eligible for cancellation through one of the current discharge programs. For example, you may be able to cancel your federal student loans if:
- you have a serious disability that prevents you from working;
- your school closed before you completed your program;
- your loans were taken out in your name without your knowledge;
- your school lied to you about important information about the program you would attend, the outcomes of graduates, or the type of federal aid you’d receive, or they engaged in aggressive and deceptive recruitment.
For more information about discharge programs, and how to apply, see here. You may be able to apply to cancel your loans through one of these programs and request to have collections stopped on your loans while your application is considered.
Additionally, you may be eligible to have your student loans discharged through bankruptcy, but doing so is difficult. And it is often considered a last resort because it impacts your credit and involves a lot of time and expense. Bankruptcy may still make sense for some borrowers; more information is available here.
4. Consider Options to Get Out of Default – And to Stay Out of Default
If you’re in default but you are not eligible for a loan discharge, then you may want to get your loans out of default to prevent or stop forced collections. Getting your loans out of default has other benefits too, including improving your credit and restoring your eligibility for federal student aid if you want to go back to school.
There are generally two ways to get out of default: consolidation and rehabilitation.
- Consolidation means taking out a new federal Direct Consolidation Loan to pay off your defaulted loans. It is generally the fastest and most straightforward way to get out of default (and can be done online at studentaid.gov), but there are some downsides. One downside is that, as a result of a recent change in approach, you will lose any credit you have earned toward having your loans forgiven in an income-driven repayment plan. You may be able to see how much credit you could lose by logging into studentaid.gov and looking for the “End of IDR Payment Term” information on your dashboard.
- Rehabilitation means entering into a rehabilitation agreement with your loan holder and making nine months of on-time payments in amounts set based on your income. If you successfully complete the rehabilitation, then your loans will be removed from default and put back in repayment. Rehabilitation takes much longer than consolidation, and if forced collections begin on you before you enter a rehabilitation agreement, then collections may continue for months while you make rehabilitation payments.
There are pros and cons to each option, and the Department of Education has a comparison chart and more details here. Additionally, borrowers should be aware that you are generally limited to only using each option once, so not all borrowers will be eligible to rehabilitate or consolidate out of default.
Whichever path you choose, you will want to avoid defaulting again after getting your loans out of default. For most borrowers, the best way to do that is to enroll in an income-driven repayment plan (which may offer payments as low as $0 / month) or to make use of forbearances and deferments that temporarily postpone payments during periods you can’t afford to pay.
5. Other Ways To Protect Yourself from Collections
If you aren’t eligible to have your loans cancelled and you can’t get them out of default through consolidation or rehabilitation, there may still be something you can do to protect yourself from forced collections.
For example, if having money taken from your Social Security benefits would prevent you from being able to pay your living expenses, you can request relief from Social Security seizures based on financial hardship.
Or, it is possible that the government’s information is wrong and your loans should not be in default, or the amount they are claiming you owe is wrong, or you should be temporarily protected from collections (often called “in stopped collections”) because you have applied for a discharge. You can request to review your student loan records and you can raise an objection to collection. For more information about how to request your records and object to collection, see here.
Are you at risk for forced collections after struggling with student loan debt? How could it impact your family? Share your story.