Ibrahim Gardner
Student loan borrowers have been granted some respite since March 2020, when collections on defaulted federal student loans were paused. However, the U.S. Department of Education has announced that it will resume collections on defaulted loans from May 5, with almost 25% of the federal student loan portfolio at risk of default. This move aims to protect taxpayers from the burden of federal student loans, with the Department of Education and Treasury working together to ensure borrowers return to repayment for the sake of financial stability. While some borrowers are in delinquency or deferment, others have not started repayment due to processing pauses. The government provides various repayment options, including subsidized loans where the government pays interest during specific periods, and waivers under certain circumstances.
| Characteristics | Values |
|---|---|
| Student loan provider | U.S. Department of Education |
| Loan type | Federal Direct Student Loan |
| Loan categories | Federal Direct PLUS loans, Federal Direct Stafford loans, Federal Family Education Loan Program |
| Interest payment responsibility | Depends on loan type |
| Student responsibility | Depends on loan type |
| Student loan repayment assistance eligibility | Employees serving in excepted appointments with non-competitive conversion to term, career, or career-conditional appointments |
| Student loan repayment benefits | Tax withholdings, merit system principles, labour relations statutes, union agreements, etc. |
| Student loan repayment waivers | In case of death or disability retirement |
| Student loan default | Resumption of collections from May 5th |
| Number of borrowers | 42.7 million |
| Amount owed | $1.6 trillion |
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What You'll Learn
Student loan repayment plans
- Standard Repayment Plan: This is the default plan for most borrowers. It typically offers fixed monthly payment amounts, including interest, with a minimum payment of $50 per month. The standard plan usually has a term of 10 years, but it can be longer for new loans or those borrowed after a specific date.
- Income-Driven Repayment (IDR) Plans: These plans tie your monthly payments to a portion of your income. There are several types of IDR plans, such as Income-Based Repayment (IBR), PAYE, and Income-Contingent Repayment (ICR). The term for IDR plans can be 20 or 25 years, depending on when you started borrowing. IDR plans are suitable for those pursuing loan forgiveness and provide flexibility if your income changes. However, the extended repayment period may result in paying more interest over time.
- Repayment Assistance Plan (RAP): The RAP is a new plan that will replace all current IDR plans starting July 1, 2026, according to Trump's budget bill. Borrowers enrolled in specific plans, such as SAVE and PAYE, will be automatically transferred to RAP by July 1, 2028. RAP offers income-driven payments for new borrowers and eligibility for student loan forgiveness.
- Extended and Graduated Repayment Plans: These options provide flexibility for borrowers who need lower monthly payments but don't qualify for IDR plans. Graduated repayment plans start with lower payments that gradually increase over time, while extended repayment plans offer longer terms, resulting in lower monthly payments. However, these plans may result in higher overall interest costs.
It's important to note that the availability and specifics of repayment plans can change over time, and different countries or loan providers may have their own unique set of options. Always review the terms and conditions of your loan and consult official government websites or financial advisors for the most up-to-date and accurate information regarding student loan repayment plans.
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Student loan forgiveness
In the United States, the Department of Education has announced that it will resume collections of its defaulted federal student loan portfolio. This initiative will be paired with a comprehensive communications and outreach campaign to ensure borrowers understand how to return to repayment or get out of default. The Department of Education, in conjunction with the Department of Treasury, will manage the student loan program responsibly and according to the law, helping borrowers return to repayment for the sake of their financial health and the nation's economic outlook.
The Public Service Loan Forgiveness (PSLF) Program allows qualifying federal student loans to be forgiven after 120 qualifying payments (10 years) while working for a qualifying public service employer. Public service employees, including firefighters, police officers, nurses, and other emergency service employees, as well as employees of any state, local, or tribal government, and certain nonprofit agencies, may be eligible for the PSLF Program.
The Income-Driven Repayment (IDR) plan is another option for student loan forgiveness. Under this plan, monthly payments are capped according to income and family size. The remaining balance on loans may be forgiven after 20 or 25 years of repayment. The Department of Education has announced several changes and updates to bring borrowers closer to forgiveness under IDR plans, including a one-time adjustment to count certain months towards loan forgiveness.
It is important to note that only federal student loans managed by the Department of Education qualify for the one-time IDR adjustment. Borrowers with Direct Loans or federally-managed FFELP loans will automatically benefit from the adjustment, while those with FFELP loans held by commercial lenders or Perkins loans not held by the Department of Education can benefit by consolidating into Direct Loans by June 30, 2024.
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Student loan delinquency
The COVID-19 pandemic relief measures, which paused federal student loan repayments, have now ended. This has resulted in a surge of delinquency rates to a five-year high in early 2025. One in 10 borrowers was 90 days or more delinquent on their loans during the second quarter of 2025. The end of the pandemic relief measures, combined with rising prices and stagnant wages, has left borrowers struggling to access affordable credit.
The consequences of student loan delinquency can be severe. Delinquent borrowers face reduced credit scores, making it difficult to access new credit and affecting their ability to qualify for autos, mortgages, and credit cards. The mental and emotional stress associated with loan obligations can also be significant, impacting borrowers well into their 50s. Additionally, there are concerns about the disproportionate impact on Black and Latino borrowers, who already face racial disparities in wealth and income.
The U.S. Department of Education and the Department of Treasury are working to help borrowers return to repayment and protect taxpayers from shouldering the cost of federal student loans. The Department of Education resumed collections on defaulted federal student loans in May 2020, after a pause since March 2020. They plan to pair this initiative with a comprehensive communications campaign to support borrowers in understanding their repayment options and getting out of default.
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Student loan deferment
A student loan deferment is a temporary pause on loan payments in specific situations, such as active military duty or reenrollment in school. Borrowers can apply for a deferment with their loan servicer but must continue making payments until notified that their deferment has been approved. During a period of deferment on a subsidized loan, borrowers are not responsible for interest accrued. However, for unsubsidized loans, borrowers are responsible for interest accrued during the deferment period, which, if not paid, will be added to the loan balance.
Private student loan deferment options are not guaranteed and vary among lenders. Borrowers considering this option should contact their loan servicer as early as possible to explore the specific terms and fees associated with postponing payments. These terms are based on the contract and applicable laws and may differ from the more favourable terms offered for federal student loan deferment or forbearance.
The US Department of Education offers federal student loan deferment, and a list of qualifying reasons for deferment has been published. As of May 2024, the Department of Education resumed collections on defaulted federal student loans, which had been paused since March 2020. This initiative aims to protect taxpayers from the burden of federal student loans, with a focus on helping borrowers return to repayment and improve the nation's economic outlook.
At the time of the announcement, approximately 42.7 million borrowers owed more than $1.6 trillion in student debt. A significant number of borrowers were in default or delinquency, and nearly 1.9 million had not started repayment due to a processing pause. The Department of Education, in conjunction with the Department of Treasury, is committed to responsibly managing the student loan program, ensuring borrowers understand how to resume repayment and avoid default.
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Student loan repayment assistance
The US Department of Education's Office of Federal Student Aid (FSA) offers various programs to assist borrowers in repaying their federal student loans and avoiding default. These programs aim to help borrowers return to repayment while protecting taxpayers from shouldering the cost of federal student loans.
One initiative is the Treasury Offset Program, which helps borrowers get back into repayment and avoid default. The Department of Education also provides a comprehensive communications and outreach campaign to ensure borrowers understand their options and obligations. Additionally, the Department of Education, in conjunction with the Department of Treasury, aims to responsibly manage the student loan program according to the law, considering both borrowers' financial health and the nation's economic outlook.
The FSA offers several repayment plans, including Income-Based Repayment, Income-Contingent Repayment, and PAYE. These plans can provide borrowers with more manageable monthly payments based on their income. However, there was a processing pause for new applications for these repayment plans from August 2024 until the following month.
Furthermore, certain professions, such as health careers, may qualify for loan repayment assistance programs. For example, the Bureau of Health Workforce (HRSA) offers programs that repay a portion of school loan debt for those who meet specific qualifications and requirements.
It's important to note that federal student loans are financed by taxpayers, and the government has a responsibility to protect taxpayers from irresponsible lending practices while also helping borrowers manage their debt effectively.
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Frequently asked questions
The U.S. Department of Education announced that it would resume collections of defaulted federal student loans starting May 5.
If you are unable to pay your student loans, you may be eligible for an interest-free forbearance or deferment. You can also contact your loan servicer to discuss alternative repayment plans.
While there have been discussions about student loan forgiveness, there has been no official decision or announcement made by the government regarding widespread student loan forgiveness.
Defaulting on your student loans can have serious consequences, including wage garnishment, tax refund offset, and damage to your credit score. It's important to contact your loan servicer as soon as possible to discuss your options if you're struggling to make payments.
The U.S. government offers various student loan repayment assistance programs, including income-based repayment plans and public service loan forgiveness. These programs can help reduce the burden of student loan debt and accelerate repayment.
