Student loan debt collections to resume for borrowers in default

Geoff Bennett:

Policies of the Trump administration are having a separate effect on higher ed, namely, student loans and debt.

Next month, the Department of Education will resume collections of defaulted student loans, ending a five-year pause that began during the pandemic. As part of the process, the government will withhold tax refunds or Social Security and garnish wages to recover the debt. Right now, more than five million borrowers are already in default, with millions more at risk.

Danielle Douglas-Gabriel covers higher education for The Washington Post and joins us now. It's great to have you here.

So, help us understand why the administration is making this change and why now.

Danielle Douglas-Gabriel, The Washington Post:

So, honestly, this was always the plan. When the Biden administration, before leaving office, they had ended a number of programs that had really kind of softened the return to repayment.

Now, if you recall, the student loans resumed back in 2023. Then the Biden administration gave borrowers an additional 12-month grace period, whereby, if you were to miss a payment or be late on a payment, it wouldn't count against you. That was over in September 2024.

And I think now we're starting to see the consequences of the end of that grace period. A lot of borrowers I have spoken with in the last couple of months have said that they weren't even aware that student loans had fully gone back into repayment. And so many of them accidentally missed payments for several months. At least that's what they're saying to me.

And now we're starting to see the consequences of that. I think around February, you were starting to hear about people whose credit scores guarded to drop because the department had to and student loan servicers that managed the loans had to report their late payments to the credit bureaus.

And so there are about four million people who are 90 days past due on their student loans. And so there's a real fear right now that many of those people, if there isn't an intervention and they don't start making payments or find a plan that they could afford, they could go into full-blown default later this year.

And if that were to happen, and they're past a full year of not making payments, well, that's when you start to see things like the government garnishing your wages. That's when they can start seizing your tax refund, seizing Social Security benefits. And certainly we don't want to see that for any American, especially because the consequences are so severe.

And people are really worried about their economic status at this stage.

Geoff Bennett:

Well, I was going to ask you when the collections will officially resume, but it sounds like it started already.

Danielle Douglas-Gabriel:

Certainly, at least the reporting of missed payments to the credit bureaus.

And that's like the first couple of stages. There are many stages of being delinquent on your loans before you hit full-blown default. Usually, the government considers you in default by 270 days. They start reporting you full-fledged in 360 days. But before that, if you are 60 days past due or 90 days past due, you will start to see the effects on your credit score, which can make it difficult to get a mortgage, get a car loan or even rent an apartment.

Geoff Bennett:

And, Danielle, because of the Trump administration's prior dismantling of the Education Department, we are hearing accounts of borrowers having a hard time getting in touch with a real person at the department if they have questions about their loans.

Based on your reporting, what can people do?

Danielle Douglas-Gabriel:

I mean, that has been a serious challenge. Certainly, your first line of defense is contacting your student loan servicer. These are companies like Nelnet, Mohela, contractors that work for the department.

But they're going to be inundated with calls, I expect. And the Department of Education, the Federal Student Aid Office, has kind of been the backup here, where borrowers can call if they have complaints. But as a part of the Trump administration's efforts to close the Department of Education, a lot of the people who worked at the Federal Student Aid Office have left, lost their jobs or just resigned.

Geoff Bennett:

And, lastly, on a separate topic, today, more than 180 leaders of higher education from around the country released a joint statement condemning the administration's efforts to control universities.

And part of the letter reads this way: "We are open to constructive reform and do not oppose legitimate government oversight. However, we must oppose undue government intrusion in the lives of those who learn, live and work on our campuses. We must reject the coercive use of public research funding."

And this, of course, is a day after Harvard sued the Trump administration over the decision to freeze billions of dollars in federal funds. What are the implications of the Trump administration's confrontations with colleges and universities for funding, for campus climate and the role of higher education in our democracy?

Danielle Douglas-Gabriel:

I think there's a real threat and a real concern that the administration's efforts could undo years of research advancements and really set the United States back in its role of being a leading-edge place for innovation, which — and that innovation has come at our research universities, many of which are the subject of these sorts of investigations for not doing enough to curtail antisemitism on their campuses.

And there are real concerns about rising antisemitism across the country. Many of these schools have enumerated the steps that they're taking to try to fix this, but the administration's tactics have left a lot of institutions fearful that there is no real way to satisfy them.

If you look at what happened with Columbia, Columbia tried to negotiate in good faith with the administration and still did not receive the $400 million in research funding that was frozen.

And I think, after Harvard made the decision to rebuke the administration's demands and then ultimately filed this lawsuit earlier this week, you have seen a lot more university leaders willing to speak up and say that they are not going to let the federal government tell them what to teach, who to hire, or how they have to conduct the business of their universities, because it would be detrimental to the U.S.' standing within higher education.

Geoff Bennett:

Danielle Douglas-Gabriel of The Washington Post, always a pleasure to speak with you. Thanks for being with us.

Danielle Douglas-Gabriel:

Thank you so much.