Feds Make Major Student Loan Announcement: What It Means For NJ

The U.S. Department of Education resumed collections on student loans paused during the pandemic last month, but this week announced a change for those who defaulted on payments.

No one is touching your social security.

According to the AP, spokesperson Ellen Keast confirmed that those who have defaulted will no longer be at risk of having their Social Security benefits garnished for the time being. There is now a pause on “any future Social Security offsets.”

Under the federal government's resumed referrals of involuntary collections for those in student loan default, paychecks and tax refunds are still being targeted.

“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” U.S. Secretary of Education Linda McMahon said in May. “The Biden Administration misled borrowers: the executive branch does not have the constitutional authority to wipe debt away, nor do the loan balances simply disappear. Hundreds of billions have already been transferred to taxpayers.”

The department says they have not taken any Social Security benefits since their collections restarted after when the COVID-19 pandemic put a pause on them for millions with outstanding student loan debt to help with financial hardships in 2020. That grace period ended in 2023.

“Simply pausing this collection tactic is woefully insufficient,” said Persis Yu, executive director of the Student Borrower Protection Center. "Any continued effort to restart the government’s debt collection machine is cruel, unnecessary and will further fan the flames of economic chaos for working families across this country.”

According to the AP, there are approximately 5.3 million borrowers currently in default.

Among them, those 60 and older hold an estimated $125 billion in student loans, according to the National Consumer Law Center. This equates to a six fold multiplier as compared to 20 years ago.

What to Know About the Resumption of Collections (According to the United States Department of Education):

• All borrowers should have already received email communications from the Office of Federal Student Aid (FSA) that made them aware of these developments and urged them to contact the Default Resolution Group to make a monthly payment, enroll in an income-driven repayment plan, or sign up for loan rehabilitation.
• Later this summer, the FSA will send required notices beginning administrative wage seizure.
• Guaranty agencies will be notified that they may begin involuntary collection activities on loans under the Federal Family Education Loan Program. All FSA collections are required under the Higher Education Act and are carried out only after student and parent borrowers have been provided sufficient notice and opportunity to repay their loans under the law.

The Department of Education directs anyone looking for help getting out of default to visit and utilize the resources at StudentAid.gov/end-default.

Other Useful Information From The AP:

• Student loan forbearance is a temporary pause on payments granted to borrowers who are experiencing financial difficulties. People must contact their loan servicer to apply.
• Forbearance is not available for borrowers whose student loans are in default, but can be utilized if you are delinquent on your loan.
• To find the status of a student loan and your loan servicer information: Access your studentaid.gov account.