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Trump ends repayment freeze

Trump ends repayment freeze

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Trump ends repayment freeze

A policy analyst says it's "great" that the Department of Education is getting ready to start collecting student loan repayments after a more than five-year pause.

Madison Doan of The Heritage Foundation's Center for Education Policy says the pandemic-related pause began in March of 2020, around the start of the COVID lockdowns.

"The department announced … that the student loan portfolio is headed towards a fiscal cliff, " she notes. "Almost 25% of federal student loan portfolio will be in default within just a few months."

This means almost 10 million borrowers will be in default.

Recognizing that the economy was in a much better position in October 2023, Doan says the government tried to start repayments as part of the Fiscal Responsibility Act of 2023. But the Biden administration changed that "basically the month of."

Doan, Madison (Heritage) Doan

The former president said that borrowers would resume repayments after a 12-month on-ramp period that lasted until September 2024. As part of that, delinquent borrowers were shielded from collections, wage garnishments, or tax refund offsets, even as they remained in default. 

Meanwhile, The Heritage Foundation has been talking about a bigger picture.

"The federal government currently originates around 90% of all student loans, and it's crowded out private lenders, leaving taxpayers on the hook for defaults and loan forgiveness," the analyst reports.

As more federal subsidies have become available, tuition has increased.

Doan says, "We just have to start winding down federal involvement in the student loan market."

She calls it "great" that involuntary student loan collection for defaulted borrowers is scheduled to begin this Monday, May 5.

All borrowers in default can expect an email from the DOE's federal student aid office within the next two weeks, with wage garnishment notices by mid-summer — specifically for those in default.

This comes as the Trump administration works to dismantle the Department of Education.

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