Defaulted Student Loans

The US Education Department announced yesterday it will resume involuntary collections on defaulted federal student loans for the first time starting May 5, ending a pause that began five years ago during the COVID-19 pandemic. 

Under a Treasury Department program, the government will deduct overdue loan payments from tax refunds, federal salaries, and benefits. Wage garnishment—where a portion of wages are withheld and sent to loan holders—will resume after a 30-day notice period. Impacted borrowers will receive notifications within two weeks. More than 5 million borrowers are currently in default, while an additional 4 million have made late payments. Roughly one-third of 38 million borrowers are making payments on their student loans, per government data. 

Separately, Harvard sued the Trump administration yesterday after the government withheld more than $2.2B in grants and $60M in contracts to pressure the university into complying with a list of policy and program reforms.