If you miss a payment on your student loan, even by just one day, your loan becomes delinquent. That may not sound like a big deal at first, but if you do not take action, things can spiral fast. After 270 days of non-payment, your loan officially goes into default.
Once your loan defaults:
- The entire remaining balance, including interest, becomes due immediately
- You lose access to helpful options like forbearance, deferment, and repayment plans
- Your credit score takes a hit, which can affect your ability to buy a car or a house
- You become ineligible for future federal student aid
- The government can garnish your wages, seize tax refunds, and even take other federal payments
- Legal action could be taken, and you may face court and attorney fees
This is why it is critical to act before your situation gets worse—especially now, with the new deadline just around the corner.
When will student loan collections resume?
The Trump administration has set a firm deadline: May 5.
After more than four years of paused collections due to the COVID-19 emergency, the federal government is resuming efforts to recover defaulted federal student loans. More than 5 million borrowers are already in default, and another 4 million are late on payments, according to the U.S. Department of Education.
Borrowers in default will begin receiving emails over the next few weeks. If no action is taken by the deadline, the government will begin:
- Garnishing wages
- Withholding tax refunds
- Taking other federal payments
You do have a chance to avoid this, but time is running out.
How to get out of student loan default
If you are already in default, do not panic—but do not ignore it either. The good news is, there are ways to get back on track before collections begin.
Here is what you can do:
- Apply for an Income-Driven Repayment (IDR) plan
These plans adjust your monthly payments based on your income, and can be very affordable. - Start making payments before May 5
Even a single payment shows the government you are trying. - Consider loan rehabilitation or consolidation
These are two options that can remove the default from your record.
Mike Pierce, executive director of the Student Borrower Protection Center, called the move “cruel” and warned it will create more economic hardship for working families. But he also reminded borrowers, “Federal law gives borrowers a way out of default and the right to make loan payments they can afford.”
What repayment plans can help lower your monthly payments?
The government offers several income-driven repayment plans to help you manage what you owe. Each has different terms, but they all have one thing in common: they make payments more manageable.
Here are the most common options:
- Income-Based Repayment (IBR):
Pay 10% to 15% of your discretionary income. Forgiveness after 20–25 years. - Income-Contingent Repayment (ICR):
Pay 20% of your discretionary income or a 12-year fixed amount—whichever is less. Forgiveness after 25 years. - Pay As You Earn (PAYE):
Pay 10% of your discretionary income. Only for loans after October 1, 2007. Forgiveness after 20 years. - Revised Pay As You Earn (REPAYE):
Pay 10% of discretionary income. Forgiveness after 20 years for undergrads and 25 years for grads.
If you do not choose one, you will automatically be put on the Standard Repayment Plan, which may come with higher monthly payments.
What is the government saying about this new move?
In a statement issued on April 21, U.S. Secretary of Education Linda McMahon said, “American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies.” She added that the Department of Education will now work to help borrowers return to repayment “for the sake of their own financial health and our nation’s economic outlook.”
So while collections are resuming, there is also a push to get people into repayment plans that actually work—if they act quickly.
