Student Loans Collections Resume: What Borrowers Need to Know Now

Collections are back—borrowers must act now to avoid penalties.

After a prolonged pandemic-era pause, the collection of defaulted federal student loans has officially resumed. For millions of borrowers, this means renewed pressure to resolve debts that may have been dormant for years.

Whether you’re already in default or worried about slipping into it, understanding how this shift affects you is critical.

Collections resuming is not just a bureaucratic update—it can bring serious financial consequences, including wage garnishment, tax refund offsets, and damaged credit scores.

This article walks you through what’s changing, how collections will be enforced, and what steps you can take right now to regain control of your student debt.

What Does It Mean That Student Loan Collections Resume?

When student loans enter default—typically after 270 days of non-payment—borrowers become subject to federal collections processes.

These can include aggressive recovery methods like wage garnishments, seizure of tax refunds, and withholding of Social Security benefits.

During the COVID-19 pandemic, these actions were paused, offering borrowers temporary relief. Now, that pause has ended, and the Department of Education has restarted the collections process.

Collections resuming doesn’t just mean letters in the mail—it’s a signal that inaction can carry real and escalating consequences.

Borrowers in default will see renewed efforts to recover unpaid balances, and some may already be receiving notices or contact from collection agencies.

How Borrowers Are Affected by the Change

The end of the collections pause means:

• Wage garnishment resumes: The federal government can withhold up to 15% of your disposable pay.
• Tax refunds may be seized: If you’re due a refund, it could be redirected to cover your loan.
• Social Security offsets: Even retirement-age borrowers aren’t exempt from collection.

For many, this change comes at a time of ongoing financial stress. Rising costs of living, job market fluctuations, and delayed career starts have left many Americans unprepared to absorb another financial hit.

Still, ignoring the issue is not a solution—it may only make things worse.

What Can Borrowers Do Right Now?

If you’re in default or fear you’re close to it, take action immediately. Here’s how:

1. Check Your Loan Status

Log into your Federal Student Aid account to confirm if your loans are in default or delinquent. Your status will determine what steps are available.

2. Consider Fresh Start

The Department of Education is offering a one-time initiative called Fresh Start. It gives defaulted borrowers a chance to bring their loans back into good standing without penalties.

Enrolling in this program can stop collections and remove default from your credit report.

3. Explore Repayment Options

If your loans are eligible, look into income-driven repayment (IDR) plans. These plans cap your monthly payments based on income and family size, often resulting in very low or even $0 payments.

4. Contact Loan Servicers or the Default Resolution Group

Avoid ghosting your servicer. They can help you navigate options like rehabilitation or consolidation to get out of default.

What If You Can’t Afford to Pay?

Financial hardship is common—and expected. If you can’t afford payments even under an IDR plan, consider these steps:

• Deferment or Forbearance: While not ideal, they can temporarily pause payments.
• Bankruptcy (in rare cases): Student loans are difficult but not impossible to discharge through bankruptcy.
• Nonprofit Assistance: Organizations offer legal help and advocacy for struggling borrowers.

Remember, default isn’t a life sentence. But resolving it takes intention and proactive choices. Letting collections resume without a plan only increases the risk of financial harm.

What’s Next?

With student loan collections now fully reinstated, the federal government has made it clear: borrowers must reengage with their loans.

While some safety nets exist, the burden of action falls squarely on the borrower. Fortunately, tools like Fresh Start and IDR plans make it easier than ever to break free from the cycle of default.

If you’re unsure of where to begin, start by reviewing your loan information and contacting your servicer. Acting today could save you from painful consequences tomorrow.

Final Thought:

Collections have resumed, but so have opportunities to rebuild. Don’t wait for a wage garnishment notice—take the first step toward resolution now.

Written by

Everaldo