Treasury Takes Over Defaulted Student Loans from ED
Key Questions
What recent change happened with defaulted student loans?
The U.S. Treasury Department has completed the handover of approximately 9 million defaulted student loans worth over $180 billion from the Department of Education on March 19. This shift is occurring amid ongoing developments in loan management.
Are wage garnishments and tax refunds on hold for defaulted loans?
Yes, the Trump administration has suddenly halted IRS wage garnishments (up to 15%), tax offsets starting April 2026, and Social Security Treasury Offset Program actions on May 5, at least temporarily amid chaos. The resumption timeline remains unclear.
When will voluntary outreach to defaulted borrowers begin?
Voluntary outreach to borrowers is planned to start around August 2026. This follows the handover and temporary halt on collections.
How can borrowers avoid collections on defaulted student loans?
Borrowers can take steps like loan rehabilitation or consolidation combined with income-driven repayment (IDR) to avoid collections. These are among five recommended avoidance strategies.
What is the reaction from Senate Democrats to these changes?
Senate Democrats have expressed outrage over the Trump administration's plan, demanding a pause amid 471,000 borrower complaints. Uncertainties around garnishments are emerging as the situation develops.
Handover of ~9M defaulted loans ($180B+) complete March 19; Trump admin sudden halt on IRS wage garnishments (15%), tax offsets April 2026, SS TOP May 5—at least for now amid chaos; voluntary outreach ~Aug 2026 first; 5 avoidance steps (rehab, consol+IDR); Senate Dems outrage, demand pause amid 471k complaints; garnishment uncertainties emerging.