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The US Department of Education has announced it will resume collections on defaulted federal student loans for the first time since 2020, marking a significant shift in student loan policy. The decision is expected to affect nearly 4 million borrowers who are currently in late-stage delinquency.
As reported by Fox News, the move will officially take effect on May 5, 2025, when the Education Department partners with the Treasury Offset Program to begin collecting overdue payments. The decision ends a four-year pause that began in March 2020 under the first Trump administration in response to the Covid-19 pandemic.
Delinquency rates signal mounting crisis
According to a senior department official quoted by Fox News, only 40% of federal student loan borrowers are currently up to date on their payments, while the remaining 60% are either delinquent or in default. Among them, about 4 million are classified as being in the late-stage delinquency phase, meaning they are between 91 and 180 days behind on their payments.
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The same official warned that the US student loan portfolio is “headed toward a fiscal cliff” if collections are not resumed. As reported by Fox News, the official emphasized that “student loan debt must be paid back” and that the current trajectory is unsustainable for American taxpayers.
Total student debt reaches $1.6 trillion
The total outstanding balance of federal student loan debt in the US now stands at $1.6 trillion, covering nearly 43 million borrowers, according to the Department of Education. The growing debt burden has become a focal point of national policy discussions, particularly with the Trump administration’s renewed focus on education reform.
As quoted by Fox News, the senior official explained, “The Trump administration, [the] current administration, believes that American taxpayers can no longer serve as collateral for student loans.”
Reform and communication efforts underway
The Education Department is planning a comprehensive communication campaign to notify borrowers of their repayment status and encourage enrollment in auto-debit systems to reduce delinquency rates. In addition, the department is collaborating with lawmakers to reform the student loan system and reduce college costs.
Fox News reported that legislation such as the Employer Participation Repayment Act is under consideration, allowing employers to contribute up to $5,250 tax-free toward employees’ student loans.
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