Student Loan Collections Are Restarting: Here's How to Stay Ahead
After a five year hiatus, student loan collections are restarting. Find out what’s changing, how it could affect you, and what steps to take to stay on track in 2025.
MONEY MINDSET
Marie
4/28/20252 min read
Student loan collections are resuming, and for millions of Americans, it's time to get a game plan.
The U.S. Department of Education will officially restart collection efforts on federal student loans on May 5, 2025.
The long pandemic-era pause is ending, and there is no time to waste in gaining control of your repayment strategy.
Over 5 million borrowers are currently in default, with another 4 million at risk of falling behind. But with a few smart moves, you can confidently align your finances to move forward.
Student Loan Collections - What's Changing?
Federal student loans overdue for 270 days or longer are officially in default status.
The government is resuming several collection actions, including:
Wage Garnishment: As much as 15% of your disposable income could be withheld directly from your paycheck.
Tax Refund Reductions: Federal tax refunds could get redirected to cover your student loan balance.
Social Security Adjustments: Some Social Security benefits could be redirected to help cover defaulted loans.
By design, these efforts will enforce repayment on outstanding Federal Student loans while easing the burden on taxpayers.
That said, if you are a borrower concerned about how these changes might impact your financial future, you can take steps now to mitigate these outcomes, but it starts with being proactive.
What to Do Now to Avoid Going to Student Loan Collections
If you're worried about defaulting or are already behind on your student loan payments, here are steps to meet the challenges and address the issue head-on:
Reach Out to Your Loan Servicer: Consider options like loan rehabilitation or consolidation.
Explore Income-Driven Repayment (IDR) Plans: These plans are based on income and family size and could make repaying these loans more affordable for qualified individuals.
Use the Student Loan Payoff Calculator: Get a clear view of your options and create a realistic action plan that fits your life.
Watch Out for Scams: Trust only official loan servicers. If something sounds too good to be true, it probably is.
A Heads-Up for Married Borrowers
If you're married, there's a new detail that could matter:
Your spouse's income may - or may not - factor into your repayment calculations, depending on how you file your taxes.
Married Filing Separately: Your monthly payment will be solely based on your income.
Married Filing Jointly: Your total household income will help determine your monthly payments.
Choosing the right tax filing status can result in a significantly lower payment; however, it may also impact other tax benefits.
If you have further questions, checking with a tax professional is highly advisable before making any decisions.
Stay in Control
Managing student loan debt isn't always easy, but there are powerful tools to help you navigate the process.
Start by using our Student Loan Payoff Calculator to map out your next steps and see how smart planning today can make a big difference tomorrow.
You've got options - and the more you know, the stronger your position.
Note: This is for informational purposes only and is not financial advice. Always consult a trusted financial advisor or loan servicer for personalized guidance.
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