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Trump administration to resume collection of student loans, plans to seize wages and pension from defaulters

The Trump administration has announced that it plans to resume collection of defaulted student loans from May 5, 2025.

This marks the end of a pause that was put in place as a result of the COVID-19 pandemic beginning in 2020.

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The Department of Education outlined this change as part of a broader strategy to address the nation’s substantial $1.6 trillion student loan portfolio.

Key components of this approach include measures such as trimming wages, seizing tax refunds, and withholding federal pensions to recover outstanding debts.

White House Press Secretary Karoline Leavitt spoke about this decision during her weekly briefing on April 22, highlighting the importance of accountability in managing federal student loans.

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She noted that “borrowers who do not meet their repayment obligations inadvertently shift the financial burden to taxpayers.”

According to the information shared, less than 40% of borrowers are currently in good standing with their payments, and around 4 million are in late-stage delinquency, being 91 to 180 days behind.

The Department of Education has expressed concern that without intervention, nearly 10 million borrowers could soon face default.

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As the Treasury Department prepares to initiate collections, borrowers will be given a 30-day notice. However, options such as income-driven repayment plans or loan rehabilitation will not be available once loans go into default, which may limit recourse for many individuals.

The Department of Education has urged borrowers to take proactive steps to mitigate any potential financial challenges they may face.

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