These PA Student Loan Borrowers Facing Mandatory Collections

The Department of Education plans to begin collection next month on federal student loans that are in default, potentially affecting hundreds of thousands of borrowers in Pennsylvania.

About 5.3 million borrowers are in default on their federal student loans, the Trump administration’s Education Department said in an announcement Monday that marks the end to a period of leniency that began during the COVID-19 pandemic.

Federal student loan debt in Pennsylvania totals $66.3 billion or about $36,267 per student, according to Education Department data. About 14.1 percent of Pennsylvania residents have student loan debt. Of those borrowers:

• 55 percent are under the age of 35
• 12.4 percent owe less than $5,000
• 24.4 percent owe between $20,000-$40,000
• 2.14 percent owe more than $200,000

“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” Education Secretary Linda McMahon said in a statement

McMahon said former President Joe Biden had gone too far when he cancelled loans for more than 5 million borrowers, waiving more than $183.6 billion in student loans through extended forgiveness programs. Biden’s actions came after the U.S. Supreme Court’s rejection of his signature proposal for broad relief.

“Going forward, the Department of Education, in conjunction with the Department of Treasury, will shepherd the student loan program responsibly and according to the law, which means helping borrowers return to repayment — both for the sake of their own financial health and our nation's economic outlook,” McMahon said.

What Happens Next?

Beginning May 5, the department will begin involuntary collection through the Treasury Department’s offset program, which withholds government payments — including tax refunds, federal salaries and other benefits — from people with past-due debts to the government. After a 30-day notice, the department also will begin garnishing wages for borrowers in default.

The decision to send debt to collections drew criticism from advocates, who said borrowers had experienced whiplash and confusion with the changing student loan policies between the Biden and Trump administrations

“This is cruel, unnecessary and will further fan the flames of economic chaos for working families across this country,” said Mike Pierce, executive director of the Student Borrower Protection Center.

Already, many borrowers have been bracing for obligations coming due.

First-term President Donald Trump paused federal student loan payments in 2020 as a temporary relief measure for borrowers. Biden extended the pause multiple times through 2023, and a final grace period for loan repayments ended in October 2024. That meant tens of millions of Americans had to start making payments again.

Borrowers who don't make payments for nine months go into default, which is reported on their credit scores and can go to collections.

Along with the borrowers already in default, around another 4 million are 91 to 180 days late on their loan payments. Less than 40 percent of all borrowers are current on their student loans, department officials said.

‘Difficult To Understand’

Layoffs at the Federal Student Aid office at the Education Department have made it harder for students to get their questions answered, even if they wanted to pay their loans, according to Kristin McGuire, executive director for Young Invincibles, a group that focuses on economic security for younger adults.

And questions are swirling about certain income-driven repayment programs after a February court ruling blocked some of the payment plans.

Borrowers in the more lenient, Biden-era SAVE Plan were placed in forbearance, in which borrowers receive relief from payments but still accrue interest. The Education Department in February took down applications for income-driven repayment programs — which tie a monthly payment to a person's income level — only to bring them back online a month later.

“Things are really difficult to understand right now. Things are changing every day,” McGuire told The Associated Press. “We can't assume that people are in default because they don't want to pay their loans. People are in default because they can't pay their loans and because they don't know how to pay their loans.”

For borrowers in default, one step to avoid wage garnishment is to get into loan rehabilitation, Betsy Mayotte, president of The Institute for Student Loan Advisors, told The AP.

Borrowers must ask their loan servicer to be placed into such a program. Typically, servicers ask for proof of income and expenses to calculate a payment amount. Once a borrower has paid on time for nine months in a row, they are taken out of default, Mayotte said. A loan rehabilitation can only be done once.

The Associated Press contributed reporting.