As we enter a new era under President-elect Donald Trump’s administration, student loan borrowers must understand how potential policy shifts could impact their finances. While some leaders in the incoming administration have suggested dismantling the Department of Education, that doesn’t mean federal student debt will vanish. Loans and their collection mechanisms are deeply embedded in law and can continue under different agencies or arrangements. Here are 10 key points to keep top-of-mind:
1. The Return of Collections on Defaulted Loans
The federal government is expected to resume efforts to collect on defaulted student loans in 2025. After years of pandemic-related pauses, borrowers behind on payments may face wage garnishment and seized tax refunds as normal collection activities restart.
2. A Large Number of Defaults at Immediate Risk
More than 5.6 million borrowers are currently in default. These individuals risk sudden financial hardship once collections resume, especially if they’re unaware that old debts can still be collected, regardless of any restructuring or downsizing of the Department of Education.
3. No Official Restart Date—But Don’t Wait
While there’s no fixed date for collections to begin anew, the Biden administration indicated it wouldn’t happen before 2025. Still, don’t rely on an indefinite grace period. Preparations now—such as contacting your servicer, exploring payment plans, or consolidating loans—are critical.
4. Leniency May Be Short-Lived
Programs like the Fresh Start initiative granted defaulted borrowers a penalty-free chance to become current again. With the incoming administration possibly changing course, it’s unclear whether similar opportunities will remain available. Time may be running out to fix your default status before stricter policies return.
5. Uncertain Future for Income-Driven Repayment (IDR) Plans
The Biden administration introduced generous IDR options, such as the SAVE plan, which could automatically lower monthly payments based on income. Whether the Trump administration maintains, modifies, or eliminates these borrower-friendly terms is uncertain. Keep a close eye on policy announcements and remain ready to switch into a plan that best suits your financial situation.
6. Confusion Amid Structural Overhaul
Talk of eliminating or shrinking the Department of Education could exacerbate borrower confusion. The transfer of responsibilities to other agencies or private contractors might create more red tape. Stay informed through official government websites, reputable nonprofits, and consumer protection groups to avoid misinformation as roles and rules shift.
7. Aggressive Collections Tactics Could Persist
Despite any structural changes, the government’s ability to hire private collection agencies won’t vanish. These collectors have been accused in the past of sloppy or abusive practices, including communicating inaccurate information. Borrowers must remain vigilant and know their rights. If you experience questionable tactics, consider seeking help from legal aid organizations or filing complaints with consumer protection agencies.
8. The Hard-to-Reach Remain Vulnerable
Borrowers in default often are low-income individuals with limited financial literacy or stable contact information. Without a strong, centralized Department of Education acting as a regulator and communicator, this group may become even harder to reach and help. Those who suspect they might be in default should proactively check their loan status and seek guidance.
9. Government Can Garnish Social Security and Other Federal Benefits
If you’re in default, the government can garnish certain federal benefits, including Social Security retirement and disability payments (SSDI). It can take up to 15% of your monthly benefit, as long as you’re left with at least $750. There’s no statute of limitations on federal student loan collection, meaning the government can still collect through these methods even decades later.
10. Early Action and Outreach Are Key
Consumer groups, legal aid organizations, and advocacy groups are preparing to assist borrowers before collections resume. Don’t wait for a notice in the mail—take charge now. Understanding repayment plans, researching consolidation or rehabilitation, and seeking nonprofit counseling can help you avoid a rude awakening down the road.
Structural changes to the Department of Education don’t erase your student debt or limit the government’s collection tools. As the new administration takes the reins, staying informed, proactive, and aware of your rights is vital to navigating what may be a challenging period for borrowers—especially those already in default.
