Feds are Collecting on Defaulted Loans
The administration has announced plans to resume collection activities on defaulted student loans, with particular focus on:
Loans that have been in default for one year
Collection actions starting in approximately 30 days from the announcement
Special attention to loans that are 5-10 years old
What Collection Actions Mean for Borrowers
If your loans go into collections, you could face serious consequences:
Withholding of tax refunds
Garnishment of federal salaries
Withholding of federal benefits, including Social Security payments
Potential negative impact on credit scores for up to 10 years
Risk to other government payments, including small business rebates
Impact on Educational Institutions
The federal government isn't just targeting borrowers—they're also putting pressure on colleges and universities:
Schools with high default rates risk losing access to federal student aid programs
Institutions could lose eligibility if 30% of recent students default over three years, or 40% default in the most recent year
This could be particularly challenging for some HBCUs and for-profit/technical schools with historically higher default rates
The administration is pushing schools to take more responsibility for graduate employment outcomes
The message is clear: ignoring student loan default notices is no longer an option. With collection actions resuming and potentially severe financial consequences on the horizon, borrowers should take immediate steps to address defaulted loans.
Need Help?