In July the U.S. Department of Education intends to start “involuntary collections on student loans” that are at least 270 days delinquent, according to a May 5 “Dear Colleague Letter” from the department to universities. That is, any such highly delinquent loans will be considered in default, not just delinquent. With all of the charm of a debt collector, the Department of Education gave public notice that a pandemic-era reprieve ended last Fall.
In May about 1.2 million student loans were in default, but in July that figure will rise to nearly 2 million, and in August to about 3 million.
“Involuntary collection” will begin in July, meaning that the federal government is threatening to confiscate students’ wages, tax refunds and federal benefits. Under this plan, the federal government could garner up to 15% of a student’s income.
Reportedly there are 43 million students with a total of $1.6 trillion outstanding in student loans. In just the first three months of 2025, around 5.6 million borrowers were marked newly delinquent on their student loans. Some of the loans may be delinquent due to lack of communication from the student to negotiate an acceptable payment plan, or that the student is broke. Either way, the Department of Education is stressing the “consequences” of the failure to comply. Perhaps this crackdown is part of a labor-recycling plan to use students to replace deported immigrants in the labor market.
