Biden administration seeks to avoid default crisis for student loan borrowers as garnishments resume

Source: NBC News/CNBC

Jan. 15, 2025, 3:41 PM EST / Source: CNBC


This year, for the first time in roughly five years, borrowers who have defaulted on their federal student loan debt will face collection activity, including the garnishment of their wages and retirement benefits.

In a new U.S. Department of Education memo obtained by CNBC, a top official lays out for the first time details of when garnishments may resume — in some cases, as early as this summer.

The memo, dated days before the Trump administration takes over, details steps the Biden administration has taken to stave off a default crisis among federal student loan borrowers. It outlines strategies for the department to help student loan borrowers stay current as collection efforts resume this year.

“It is critical to continue the initiatives and fully implement the actions outlined in this memo, as the Department plans to resume default penalties and mandatory collections later this year,” U.S. Undersecretary of Education James Kvaal writes in the memo addressed to Denise Carter, acting chief operating officer for Federal Student Aid.

Read more: https://www.nbcnews.com/business/business-news/biden-administration-seeks-avoid-default-crisis-student-loan-borrowers-rcna187860