In a recent development, borrowers who have defaulted on federal student loan debt will now face collection activity after a five-year grace period. This includes potential garnishment of wages and retirement benefits.

According to a memo from the U.S. Department of Education, garnishments may resume as early as this summer. The Biden administration is taking steps to prevent a default crisis among federal student loan borrowers by implementing strategies to help borrowers stay current with their payments.

U.S. Under Secretary of Education James Kvaal emphasized the importance of continuing these initiatives to avoid penalties and mandatory collections later this year. The Education Department reported around 7.5 million federal student loan borrowers in default, a figure drawing comparisons to the 2008 mortgage crisis.

After the Covid-era pause on federal student loan payments ended in September 2023, the Biden administration offered borrowers a 12-month repayment “on-ramp” to resume payments. Now, borrowers in default may see their wages garnished starting in October, with Social Security benefit offsets resuming in August.

The Education Department memo directs efforts to help borrowers enroll in affordable repayment plans and explore forgiveness options before default. It also encourages automatic enrollment in income-driven repayment plans for delinquent borrowers.

In a new initiative, borrowers in default will soon be able to enroll in the Income-Based Repayment plan and have a pathway to loan forgiveness. Collection fees on federal student loans have been eliminated, and steps have been taken to protect Social Security benefits from offset.

These actions aim to halt Social Security offsets for many affected borrowers and reduce the offset amount for others, providing relief to those struggling with defaulted loans.

This is a developing story. Please check back for updates.