The Trump administration has restarted the process of collecting student loans and plans to reach into people’s personal bank accounts and garnish portions of their paychecks, even as borrowers and advocates decry increased financial hardship.
Over 5.3 million borrowers who received relief after the spread of the COVID-19 pandemic are set to be hurt by the new policy launching this week. The Department of Education, led by former WWE wrestling executive Linda McMahon, sent out notices to 195,000 borrowers about the impending garnishment, which will occur in 30 days.
Education Secretary Linda McMahon
The renewed push to get loan money is likely to negatively affect credit scores for millions of people. When collections enter the credit system, accounts are flagged as delinquent, lowering credit scores. This affects a host of cascading issues—applying for rent, mortgages, car purchases, and other items.
Kirabo Jackson, professor of education and social policy at Northwestern University told ABC News, “We’re talking about a chunk of the population who won’t be able to buy a car because they won’t be able to get access to a car loan or it will be prohibitively expensive.”
Under former President Joe Biden, most student loan collections were paused as Biden sought to create “breathing room” for families around the country. Under Trump, these families will be squeezed.
Republicans opposed Biden’s relief efforts and the conservative majority on the Supreme Court rolled back his ambitious plans to provide forgiveness to millions. Over the course of his presidency, at least $188 billion in debt was forgiven to 5.3 million borrowers.
Already, online platforms that allow people to crowdfund are seeing an increase in requests as Trump adds a new financial obligation to their plates. SoLo Funds, a peer-to-peer lending platform said it had seen a 12% spike in loan requests this year compared to 2024.
Mike Pierce, executive director of the Student Borrower Protection Center, told CNBC that restarting collections while the economy is still reeling from Trump’s tariff policies “will further fan the flames of economic chaos for working families across this country.”
In a Business Insider interview published Sunday, 63-year-old student loan borrower James Southern told the outlet the Trump action would suddenly add a large increase to his monthly obligations, an expense he would be unable to manage.
“They're looking at me paying $1,500 a month, and I told them, that's just impossible. I can't do that and function and pay bills and do what I need to do on a monthly basis with that kind of debt structure. I can't do it,” he said.
While squeezing borrowers, the Department of Education under Trump has been shutting down programs and departments focused on helping student loan borrowers. So as their financial burdens increase, the government has become more focused on pushing tax cuts for ultra-wealthy figures like the world’s richest man and Trump donor Elon Musk.
The Trump policy is a complete pivot away from the Biden administration, which prioritized policies meant to assist families struggling with loan debt—not adding to their burdens.
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