Millions of student-loan borrowers in the U.S. could start losing their Social Security benefits and tax refunds in just two weeks if they don’t begin repaying their loans.
The Trump administration has decided to resume collecting from borrowers who have defaulted on their student loans. This is the first time in five years that such collections have been restarted.
The Department of Education officially announced on Monday that defaulted borrowers will be moved back into repayment starting May 5.
That means borrowers who haven’t made payments for a long time now need to act fast to avoid serious financial consequences.
Education Secretary Linda McMahon explained in an opinion piece that borrowers who do not begin repaying on time will not only see their credit scores drop but may also face automatic wage garnishment. This means money can be taken directly from their paychecks.
Since March 2020, during the early days of the COVID-19 pandemic, the government had paused all collections on defaulted student loans as part of relief measures.
But that pause is ending soon. The Federal Student Aid (FSA) office will start the Treasury Offset Program again in May. This program allows the government to take away benefits like tax refunds and even Social Security payments from borrowers who haven’t paid their loans.
The process will work like this: if someone is in default and hasn’t made arrangements to repay, the government will begin by taking their tax refund or benefits. After 30 days, they could start taking money directly from that person’s paycheck.
Over the next two weeks, the Department of Education says it will reach out to defaulted borrowers to help them prepare.
Borrowers are being urged to contact the Default Resolution Group or sign up for an income-driven repayment plan. These plans adjust your monthly payment based on how much money you make, making it more affordable.
According to Education Secretary McMahon, the department is doing everything legally possible to make repayment manageable.
“If you are a student borrower with a federal loan balance and haven’t been making payments, you must restart payments now,” she said.
“Our Federal Student Aid office is providing every form of assistance we legally can to ensure that a monthly payment can fit into your budget.”
Currently, more than 5 million borrowers are already in default, which means they haven’t made a payment in more than 270 days. But this problem is even bigger.
The New York Federal Reserve recently estimated that over 9 million borrowers are behind on payments, though they haven’t yet defaulted. Once they cross the 270-day mark, they’ll also be at risk of losing their benefits.
Some lawmakers, especially from the Democratic Party, have been warning about this for a while. They believe the consequences of student loan default are too harsh, especially for older people and people with disabilities.
Last year, Senator Elizabeth Warren and other lawmakers asked the Biden administration to stop the practice of taking Social Security benefits from borrowers who are in default.
They said it was especially harmful for seniors who depend fully on Social Security to survive. “It’s a particularly devastating practice for seniors and people with disabilities who rely on Social Security as their sole source of income,” the lawmakers wrote.
But despite these concerns, the Trump administration is moving forward with restarting collections. The Education Department is asking borrowers in default to take action now. Those who don’t could see their credit, income, and government support affected for a long time.
For anyone worried, there are still options. The Default Resolution Group can help borrowers set up affordable payments or get back into good standing with an income-driven repayment plan. But time is short — the deadline is May 5.
Borrowers are strongly advised not to wait until their benefits are taken or their wages are garnished. Acting now could save them from a lot of stress and financial loss.
Disclaimer- Our team has thoroughly fact-checked this article to ensure its accuracy and maintain its credibility. We are committed to providing honest and reliable content for our readers.