The U.S. Department of Education on Thursday said it will send any defaulted student loans to debt collectors starting in May.
The Office of Federal Student Aid (FSA) will restart the Treasury Offset Program, administered by the U.S. Department of Treasury, on Monday, May 5. All borrowers in default will receive emails from the FSA over the next two weeks making them aware of these developments and urging them to contact the Default Resolution Group to make a monthly payment, enroll in an income-driven repayment plan or sign up for loan rehabilitation, according to a press release.
Later this summer, the FSA will send required notices on when wages will be deducted to pay back the debt, the DOE said.
The DOE will also authorize guaranty agencies that they may begin involuntary collections activities on loans under the Federal Family Education Loan Program.
Student loan collections were paused in 2020 to provide economic relief during the COVID-19 pandemic. U.S. Secretary of Education Linda McMahon said the pause was an "irresponsible" policy from the Biden administration.
"The Biden Administration misled borrowers: the executive branch does not have the constitutional authority to wipe debt away, nor do the loan balances simply disappear," she said. "Hundreds of billions have already been transferred to taxpayers. Going forward, the Department of Education, in conjunction with the Department of Treasury, will shepherd the student loan program responsibly and according to the law, which means helping borrowers return to repayment—both for the sake of their own financial health and our nation’s economic outlook.”
More than five million borrowers have not made a monthly payment in over 360 days and sit in default—many for more than seven years—and four million borrowers are in late-stage delinquency (91-180 days), the DOE estimated.
For more information on how to get student loans out of default, click here.
