Ian Hodgson
Tampa Bay Times
(TNS)
Starting Monday, the government will resume collections on federal student loans that are more than 270 days past due.
For the first time in roughly five years, borrowers could face wage garnishment or credit damage for falling behind.
The move ends the last piece of President Donald Trump’s pandemic-era relief, which was extended for much of the Biden administration.
The government instructed loan servicers to start reporting late payers to credit bureaus at the start of this year. Borrowers behind on their payments saw credit scores drop, according to analysis from the American Enterprise Institute.
With collections turned back on, borrowers in default could face withheld tax refunds or see payments taken directly from their paychecks.
Less than half of borrowers are repaying their loans, according to analysis from American Enterprise Institute senior fellow Preston Cooper. Nationally, roughly 5 million borrowers were in default as of March 2025 according to federal student loan data. Another 7 million were delinquent, meaning they were more than 90 days behind on payments.
Roughly 2.7 million Floridians currently carry student loan debt, totaling over $108 billion, according to the U.S. Department of Education. The average debt is roughly $40,000 but more than half owe less than $20,000.
What happens if I default on my loan?
Once the Department of Education restarts forced collections, federal payments like tax refunds, disability payments and Social Security benefits can be withheld.
The department also said it will begin garnishing wages later in the summer.
Borrowers who were delinquent on their loans may have already faced a substantial drop in their credit scores and defaulting would likely drive their scores even lower, said Preston Cooper, senior fellow at the American Enterprise Insitute.
Individuals with good credit, who should be able to make repayments, are falling behind, Cooper said. Once they become delinquent, may have seen their credit scores drop by more than 100 points, according to his analysis of credit rating data.
“That suggests there’s been some problem on-ramping them to repayments,” he said. “Maybe they don’t know their status, or their servicer hasn’t been able to reach them.”
For people who aren’t already in default, the best thing they can do be sure to make a payment before they hit the 270-day mark, which for most borrowers will come before the end of June.
“Your life gets so much more complicated once you go into default. Even if you can make one payment, you’re saving yourself a lot of trouble,” Cooper said.
What about loan forgiveness?
While broader student loan forgiveness plans like those proposed under the Biden administration are off the table, there are still options for borrowers to have some, or all, of their student loans forgiven.
The Public Service Loan Forgiveness program is still available for government and non-profit employees. Borrowers must be enrolled in an income-based plan in order to qualify for the forgiveness program in most cases.
Public school teachers, AmeriCorp members and military service members are all eligible for student loan assistance programs.
Students who were defrauded by their school or attended a school that closed may qualify for loan forgiveness.
For borrowers on income-driven repayment plans, the situation is a little more complicated.
In February, a federal appeals court issued an injunction prohibiting the Department of Education from continuing the Biden-era Saving on Valuable Education program, known as the SAVE plan. The courts also blocked parts of other income-based plans, including provisions for automatic debt forgiveness, until a final ruling can be made.
“In reality, SAVE is dead,” Cooper said. “Even though the courts haven’t made a final ruling, it’s very unlikely that it will come back in its current form.”
For borrowers on the Income-Contingent Repayment or Pay As You Earn plans, forgiveness is still pending a court decision. Borrowers in those plans are currently on forbearance and do not need to make payments towards their balance until the court order is finalized.
For plans enacted by Congress, like the Income-Based Repayment plan, loan balances will still be forgiven after 20 years of repayment. Borrowers can also sign up for a new income-based Repayment Assistance Plan, which offers forgiveness after 30 years of payments.
Can I still apply to an income-based plan?
Borrowers can still sign up for income-based plans, but it might take a while to process.
The federal government has not processed any income-driven plan application since August. Currently nearly 1.9 million borrowers are waiting to have their applications processed.
Borrowers who apply to an income-driven plan are placed in forbearance until their application can be processed. The Department of Education currently estimates that it will work through the backlog by the end of May.
“If you’re struggling to make payments and facing delinquency, signing up for one of the income-based plans can be really helpful,” Cooper said.
What happens next?
Last week Republicans in Congress introduced the Student Success and Taxpayer Savings Plan, a sweeping proposal that would significantly reshape federal student loan repayment and financial aid and cut over $330 billion in federal spending on student aid.
The plan would eliminate the SAVE repayment program and consolidate the remaining income-based plans into a single Repayment Assistance Plan, which would require borrowers to pay up to 10% of their gross income for up to 30 years.
The plan would also cap loan amounts to $50,000 for undergraduate students and $100,000 for graduate students, starting in July 2026.
The proposal would tighten eligibility for Pell Grants, which are aimed at supporting lower-income families, closing loopholes that allowed wealthier families to qualify. Students would be required to enroll full-time, closing eligibility for many part-time and working students.
Schools that had high student loan default rates would be required to reimburse the federal government for unpaid student debt.
Ian Hodgson is an education reporter for the Tampa Bay Times, working in partnership with Open Campus.
©2025 Tampa Bay Times. Visit tampabay.com. Distributed by Tribune Content Agency, LLC.
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Tags: college, Payroll, student loans
