Student loans in default will be referred to debt collection next month, Trumps DOE says

The Department of Education announced Monday that it will resume collections on student loan debt next month, including by garnishing the wages of borrowers in default. Collections, which have been paused since March 2020, will resume on May 5 and are expected to impact roughly 5.3 million borrowers currently in default on their federal student loans.“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” Education Secretary Linda McMahon said in a statement.The education secretary went on to criticize former President Joe Biden’s efforts to cancel billions of dollars in student loan debt, several of which were blocked by federal courts. “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,” McMahon said.“Hundreds of billions have already been transferred to taxpayers.

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.” Some 42.7 million borrowers who owe more than $1.6 trillion in student debt are pushing the nation’s federal student loan portfolio toward a “fiscal cliff,” the Education Department argued. The agency noted that more than 5 million borrowers have not made a single monthly payment in over 360 days and “many” haven’t in “more than 7 years.” “As a result, there could be almost 10 million borrowers in default in a few months,” the DOE said.“When this happens, almost 25% of the federal student loan portfolio will be in default.” “Only 38% of borrowers are in repayment and current on their student loans,” according to the department. The move to send debt to collections was critic...