After a five-year reprieve, the Trump administration will restart forced collections on federal student loans in default, which could include garnishing a portion of borrowers’ paychecks.

With collections in place, the last piece of the student loan machinery has been turned back on, officially ending pandemic-era relief, which began when President Donald Trump paused federal student loan payments in March 2020.

The Biden administration extended the freeze several times, and payments resumed only in October 2023. But the rules were relaxed for the first year of repayment, and borrowers weren’t penalized for slipping behind until last fall.

Now that those penalties have begun to appear, borrowers who fell behind are beginning to see their credit scores plunge, including more than 5 million borrowers in default and many millions more projected to be on the precipice.

At the same time, the Biden-era repayment program known as SAVE — which ties a borrower’s loan payments to income and household size — has been frozen since August, with its 8 million enrollees’ payments on hold. That plan is stuck in legal limbo, an evolving situation that threatens to upend the income-driven repayment plans that came before it.

Here’s where things stand for borrowers.

loan status

If you log in to your account on the federal website, StudentAid.gov, you’ll find your dashboard with details on how much you owe and the status of your loans — whether they are in repayment, for example, or default. If it’s the latter, you may also see a warning at the top.

Make sure your contact information is up to date both there and with your loan servicer, which is the company the government hired to administer your loans.

defaults

The Education Department said it will begin forced collections on loans in default May 5, which means any tax refunds and other federal payments can be withheld and applied toward your debt. (Seizures from recurring payments, like Social Security benefits, won’t start until early June.) This summer, the government said, it will send out required notices that pave the way for garnishing a portion of borrowers’ paychecks.

If you are among the 5 million borrowers in default, or those with loans 270 days or more overdue, you should expect to receive an email from the Federal Student Aid office in the next couple of weeks, urging you to get in touch with its Default Resolution Group. That unit can help get your loan situation sorted.

There are serious consequences if the loans remain in default, which means the balance becomes immediately due. The government can grab your entire tax refund (as long as it doesn’t exceed your debt amount) and up to 15% of monthly Social Security retirement and disability benefits and your paycheck.

alternatives

You can pay the loan in full, but that’s not an option for most people.

More feasible alternatives include consolidating the defaulted loans or rehabilitating the loan, which requires making nine out of 10 consecutive “reasonable” payments, determined by loan holders using a formula.

It’s usually easiest to consolidate the defaulted loan (as long as you have more than one loan) into one federal Direct Consolidation Loan, which pays off the old ones.

But there are drawbacks, especially for borrowers in income-driven repayment plans (which forgive any remaining debt after a period, generally 20 years, of payments tied to your income and household size). After consolidation, you lose any credit earned toward loan forgiveness.

payment options

Income-driven repayment plans, a decades-old safety net that ties the size of your monthly loan payments to your income level, are often a go-to option in times of financial distress.

But there are fewer income-driven options at the moment: The entire landscape was shaken up after two groups of Republican-led states challenged the Saving on a Valuable Education (SAVE) plan, the more affordable income-driven repayment plan introduced by President Joe Biden. Given the high cost of the program, the states argued that Biden had overstepped his authority, and the courts temporarily froze SAVE while the merits of the case are decided.

Remaining programs

• The Pay as You Earn (PAYE) and Income-Based Repayment (IBR) plans, where monthly payments are 10% of discretionary income for 20 years, at which time any remaining balance is forgiven* (or after 25 years for graduate borrowers in IBR).

• The Income-Contingent Repayment (ICR), where payments are 20% of discretionary income for 25 years, after which any remaining debt is wiped away. At the moment, loan forgiveness is on hold for all income-driven repayment plans with the exception of IBR.

Beyond the income-driven programs, there are repayment plans that can lower your monthly obligation: graduated repayment, where payments start lower and rise over time, and extended repayment, which lowers the monthly payment by lengthening the loan term.

The Education Department’s Loan Simulator can help borrowers evaluate and compare which type of repayment plan would work best for their situation.

Rules changes

A February court order upheld the temporary pause on the SAVE plan, but also expanded it by calling into question a long-standing feature of income-driven plans: loan forgiveness, which usually occurs after at least two decades of payments.

The 8th U.S. Circuit Court of Appeals said the Education Department lacked the explicit authority to forgive loans as part of the Income-Contingent Repayment plans, a significant departure from how the statute governing the plan had been interpreted for about 30 years.

The litigation, which is ongoing, prompted the administration to pause forgiveness on the PAYE and ICR plans since, like SAVE, they were created by the Education Department.

Borrowers in the IBR plan, which Congress enacted, can continue to have their loans forgiven. (Payments on PAYE, SAVE and ICR are counted toward IBR plan forgiveness if the borrower enrolls in the IBR program.)

Several other newer rules were changed or clarified, too. Separately, a married borrower in an income-driven plan who files a separate income tax return from their spouse will not have to include the spouse’s income in the calculation determining monthly payments, experts said, but the spouse can be included in family size.

save plan status

The Saving on a Valuable Education plan is still winding its way through the courts, and enrollees have been in limbo since last summer. Their accounts are in forbearance, which in this case means payments are on hold and interest is not accruing.