The change is set to go into effect in just a few weeks
Anyone with a student loan in the US is urged to be aware as the Education Department has issued an update that will start to impact approximately 5.3 million people as soon as next month.
The department shared its update on Monday (April 21), after federal student loan repayments were put on pause during Trump’s first term in office in response to the Covid-19 outbreak.
Since then, no federal loans have been referred for collection, and former president Joe Biden sought multiple times to offer forgiveness of the loans during his time in the White House.
Roughly 5.3 million borrowers are in default on their loans (Getty Stock Photo)
As a result, roughly 5.3 million borrowers are in still default on their federal student loans, though the Education Department has said the number of borrowers could reach 10 million in just a few months.
Now, repayments – which are described as ‘involuntary’ – are set to restart, with those impacted set to get notices in the next two weeks.
In its statement, the US Department of Education said: “Beginning May 5, the department will begin involuntary collection through the Treasury Department’s offset program, which withholds payments from the government — including tax refunds, federal salaries and other benefits — from people with past-due debts to the government.”
The department added that wages will be garnished from people with loans in default, following a 30-day warning.
Loan repayments were originally paused amid Covid-19 (BRENDAN SMIALOWSKI/AFP via Getty Images)
Loans go into default when borrowers do not make payments for nine months. This is then reported on their credit scores and can go to collections.
According to department officials, borrowers in default are joined by another 4 million borrowers who are 91 to 180 days late on their loan payments. Less than 40 percent of all borrowers are up to date on their student loans, the officials added.
Commenting on the decision to restart payments, Education Secretary Linda McMahon said: “American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies.
“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.”
“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,” McMahon added.
