The U.S. Department of Education is set to recommence collections on federal student loans in default starting next month, a move that may significantly impact thousands of borrowers in Georgia.
Currently, approximately 5.3 million borrowers nationwide are in default on their federal student loans, marking the end of a grace period initiated during the COVID-19 pandemic, according to the Trump administration’s Education Department.
In Georgia alone, the total federal student loan debt is reported at a staggering $70.1 billion, averaging roughly $42,026 per student based on Education Department statistics.
The demographics of borrowers in Georgia highlight financial challenges, with 47.4 percent of them under the age of 35.
A further breakdown reveals that 12.8 percent owe less than $5,000, while 21.3 percent carry debts ranging from $20,000 to $40,000.
Notably, 2.81 percent of borrowers are encumbered with debts exceeding $200,000.
Education Secretary Linda McMahon stated, “American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” emphasizing the need for responsible management of federal student loans.
McMahon criticized former President Joe Biden’s loan cancellation policies, which benefited over 5 million borrowers and amounted to more than $183.6 billion in waived student loans.
She accused Biden of overreaching following the U.S. Supreme Court’s rejection of his proposal for broad student debt relief.
In her statement, McMahon signaled a shift towards enforcing responsible repayment protocols through collaboration between the Department of Education and the Department of Treasury.
The new policies aim to ensure not only the financial health of borrowers but also the overall economic outlook of the nation.
Starting on May 5, the department plans to initiate involuntary collections using the Treasury Department’s offset program, which involves withholding various government payments—including tax refunds and federal salaries—from individuals with overdue debts.
After sending out a 30-day notice, the department will also commence wage garnishment for borrowers who remain in default.
The resumption of collections has stirred criticism from advocates, who contend that borrowers have experienced turmoil and inconsistency due to the fluctuating student loan policies between the Biden and Trump administrations.
Mike Pierce, executive director of the Student Borrower Protection Center, described the decision as “cruel” and “unnecessary,” arguing that it could exacerbate economic difficulties for working families across the country.
Many borrowers have already been preparing for the repayment obligations that are set to resume.
Initially, first-term President Donald Trump halted federal student loan payments in 2020 as a temporary measure to aid borrowers during the pandemic, while President Biden extended this pause several times until the final grace period expired in October 2024.
As a result, millions of Americans are now required to start making payments again.
Borrowers who default after failing to make payments for nine months face negative impacts on their credit scores and may be referred to collections.
In addition to the existing borrowers in default, there are around 4 million who are currently 91 to 180 days behind on their loan payments.
Less than 40 percent of all borrowers are up to date with their student loans, according to department officials.
Compounding the issue, layoffs at the Federal Student Aid office have strained resources and made it more challenging for borrowers to obtain assistance, leaving many with unanswered questions about repayment options.
Kristin McGuire, executive director for Young Invincibles, an organization focused on economic security for younger adults, expressed concern about the overwhelming changes borrowers are facing.
“Things are really difficult to understand right now.
Things are changing every day,” she told The Associated Press.
It is critical not to assume that borrowers in default are intentionally avoiding repayment, as many are struggling to understand or facilitate payment plans.
For those who find themselves in default, one option to avoid wage garnishment is to explore loan rehabilitation programs.
Betsy Mayotte, president of The Institute for Student Loan Advisors, explained that borrowers must communicate with their loan servicer to explore rehabilitation, typically providing proof of income and expenses.
Successful completion of a nine-month period of timely payments allows borrowers to exit default status, but this pathway can be pursued only once.
As the Department of Education prepares to resume collections, the clock is ticking for borrowers navigating these mounting challenges, leaving many in a state of uncertainty.
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