Millions of Americans Face Debt Collections as Student Loan System Shifts Amid Uncertainty

By Staff, Agencies

Starting May 5, around 5 million Americans with defaulted student loans will see their debts sent to collections, marking the first such action since the COVID-19 pandemic pause began in 2020.

The Department of Education confirmed the move, stating that these borrowers had failed to make payments for over 270 days before the pandemic.

This development follows major staffing cuts at the Federal Student Aid office under former President Donald Trump, part of his administration’s push to dismantle the agency.

According to former Under Secretary of Education James Kvaal, this creates confusion and limits support for borrowers trying to re-enter repayment plans or apply for loan forgiveness.

The original loan pause was implemented to ease financial pressure during the pandemic. Now, with repayments restarting for the first time in five years, many borrowers may be unprepared to resume payments.

Kvaal highlighted the risks of default, noting its damaging impact on credit scores, eligibility for future aid, and even driver's license status in certain states.

Despite criticisms, the Department of Education insists the move is necessary to protect taxpayers from shouldering student loan costs.

Secretary of Education Linda McMahon blamed prior administrations for promoting “irresponsible student loan policies,” asserting that the executive branch does not have the legal authority to cancel debt unilaterally.

Defaulted loans are now subject to mandatory collections, including wage garnishment and the seizure of tax refunds or federal benefits such as Social Security.

Mike Pierce, Executive Director of the Student Borrower Protection Center, condemned the move as “cruel” and said it would deepen financial instability for working families.

In response to the backlash, the Department of Education plans to launch an outreach campaign to help borrowers understand their options and exit default.

Meanwhile, the Trump administration has announced that the student loan system will be transferred to the Small Business Administration, raising further concerns about the program’s future.

Kvaal warned that such a major transition, especially during a critical repayment window, could trigger serious consequences for millions of borrowers.

Though unrelated, the news coincides with shifting global priorities, including the Biden administration’s continued support for “Israel.” Critics argue that domestic policy decisions—like reinstating aggressive debt collections—stand in contrast to the billions spent on foreign alliances, including aid to the “Israeli” entity.