OAN Staff James Meyers
8:40 AM – Tuesday, May 6, 2025
The Department of Education restarted their collections of defaulted student loans on Monday, while reminding schools that taxpayers are not on the hook for the unpaid loans.
The latest announcement comes as collections had been on pause since March 2020, due to the COVID-19 pandemic, and the latest restart will impact over five million borrowers who are currently in default on their federal student loans.
“As we begin to help defaulted borrowers back into repayment, we must also fix a broken higher education finance system that has put upward pressure on tuition rates without ensuring that colleges and universities are delivering a high-value degree to students,” Education Secretary Linda McMahon said in a statement.
“For too long, insufficient transparency and accountability structures have allowed U.S. universities to saddle students with enormous debt loads without paying enough attention to whether their own graduates are truly prepared to succeed in the labor market,” she added.
Additionally, 195,000 defaulted borrowers received a 30-day notice from the Department of Treasury on Monday, which let them know that their federal benefits will be subjected to the Treasury Offset Program. The program collects debts by taking in federal and state payments, such as tax returns.
According to the Education Department, offsets will begin in June and by the end of the summer all 5.3 million defaulted borrowers will be receiving a notice from the Treasury that their earnings will be subject to administrative wage collections.
On the same day, McMahon sent out a “Dear Colleague Letter” to colleges and universities reminding them of their obligation to support defaulted borrowers under the Higher Education Act of 1965.
“Although borrowers have the primary responsibility for repaying their student loans, institutions play a key role in the Department’s ongoing efforts to improve loan repayment outcomes, especially as the cost of college set solely by institutions has continued to skyrocket,” McMahon wrote.
Furthermore, McMahon asked schools to “refocus and expand” their efforts of counseling and giving information to borrowers as well as provide “clear and accurate information about repayment to borrowers through entrance and exit counseling.”
She did note that under the Higher Education Act, schools by law have to keep default rates “low” and also warned that schools could “lose eligibility for federal student assistance” if defaults go above 40% in one year or 30% for three consecutive years.
“[W]e strongly urge all institutions to begin proactive and sustained outreach to former students who are delinquent or in default on their loans to ensure that such institutions will not face high [default rates] next year and lose access to federal student aid,” McMahon wrote.
Meanwhile, the Trump administration also warned schools that the Education Department will begin publishing loan non-payment rates broken down by each individual university.
“The Department is committed to overseeing the federal student loan programs with fairness and integrity for students, institutions, and taxpayers,” McMahon wrote. “To that end, the Department believes that greater transparency is needed regarding institutional success in counseling borrowers and helping them get into good standing on their loans.”
McMahon also indicated that the data will be available to the public towards the end of May.
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