The Department of Education has resumed the collection of defaulted student loans, risking wage and benefit garnishment for millions of borrowers. This policy shift aligns with the Trump administration's rollback of Biden-era student loan forgiveness policies. Federal student loans default after 270 days of non-payment, and borrowers in default may face garnishment through the Treasury Offset Program. Borrowers in default can rehabilitate their loans by making nine consecutive payments, or they can consolidate loans, although this may reset progress toward loan forgiveness. Additionally, borrowers should be vigilant against scams that exploit vulnerable debtors with false promises of debt relief.

The restart of defaulted student loan collections affects over 5 million borrowers and potentially more as millions are in late-stage delinquency. This decision is part of broader policy changes under the Trump administration, reversing Biden-era initiatives on student loan forgiveness.

Federal student loans default after 270 days of missed payments, and this status is reflected on a borrower's credit report. Borrowers should verify their loan status with their loan servicer or through the Federal Student Aid website to assess their risk of default.

The Treasury Offset Program and administrative wage garnishment are mechanisms used by the government to collect debts from borrowers in default. This includes garnishing federal and state payments such as tax refunds and social security benefits.

Loan rehabilitation requires borrowers to make nine voluntary, uninterrupted payments over ten months to remove the default status from their credit report. However, previous delinquency before default remains visible on the credit report.

Loan consolidation merges multiple federal student loans into a single payment, but may result in a higher overall interest payment and restarts the clock for loan forgiveness under income-driven repayment plans.

Once in default, borrowers lose access to deferment and forbearance options until the loan is rehabilitated or consolidated. Successful rehabilitation or consolidation restores these options and access to income-driven repayment plans.

Scams targeting student loan borrowers are prevalent, particularly after announcements like the restart of collections. Borrowers should be cautious, as services like loan rehabilitation and consolidation do not require fees and can be accessed independently.