The 2025 Student Loan Shake-Up: What to Do Before You Miss a Payment

The landscape for student loan borrowers has shifted—again. After years of pauses, promises, and policy changes, the federal government is resuming collections on defaulted loans, and many borrowers are finding themselves caught off guard.

What’s Happening Right Now?

As of May 5, 2025, the U.S. Department of Education has restarted collections on federal student loans that are in default. For millions of borrowers, that means wage garnishment, tax refund interception, and other collection measures are officially back in play. Roughly 5 million borrowers are currently in default. Another 4 million are more than 90 days behind on payments and at risk of defaulting soon. These numbers matter—because inaction could have serious financial consequences.

A Shift in Policy and Priorities

The Biden administration previously proposed a targeted debt cancellation program for borrowers facing financial hardship, but that plan was withdrawn at the end of 2024 due to implementation issues. The SAVE repayment plan, which was intended to lower monthly payments and accelerate forgiveness, is currently paused due to a court injunction. This has left many borrowers in limbo.

Meanwhile, the Department of Education itself is under threat. The current Secretary, Linda McMahon, has stated her goal is to phase out the department altogether, and the administration has signed an executive order to begin that process—pending Congressional approval.

What This Means for Borrowers

• If your loan is in default, collections have resumed. That includes potential garnishment of wages, Social Security, or tax refunds.

• If you were relying on forgiveness or income-based plans, delays and legal challenges have pushed many of those options to a standstill.

• If you’re unsure of your status, now is the time to check. Don’t assume silence means safety.

  
  

Your Options

Despite the confusion, there are still tools available:

• Loan Rehabilitation: Make nine on-time monthly payments and restore your loan to good standing. This also removes the default from your credit report.

• Consolidation: Combine your defaulted loans into a new Direct Consolidation Loan and enter a repayment plan.

• Income-Driven Repayment (IDR): Options like IBR or PAYE may still be available, even while SAVE is paused.

  
  

Visit StudentAid.gov to review your current loan status and explore your options.

Final Thoughts

This moment calls for clarity and action. The restart of collections isn’t just a policy change—it’s a wake-up call. Whether you're in default or trying to stay ahead, don’t wait for another announcement to dictate your next move. Know your status, understand your rights, and take the steps needed to protect your finances.

This system may be complicated, but you’re not powerless. Knowledge and action are your best tools.