The U.S. Department of Education recently announced that it will resume involuntary collections this month on debt owed by student loan borrowers who are in default, beginning with tax refund and Social Security payment seizures. The department can head off a coming wave of further student loan defaults—which put borrower financial stability and taxpayer investments at risk—by taking quick steps to enable affordable repayment options.
Today, 43 million borrowers collectively owe $1.6 trillion in student loan debt. According to estimates by the department, nearly one-quarter of all borrowers are in or approaching loan default, which occurs after 270 days of missed payments. More than 5 million borrowers are now in default and another 4 million are over 90 days late on payments and likely to default this summer if the department doesn’t take action.
The collections announced by the department can cause serious, long-term consequences for borrowers, including not only wage garnishment and fees but also damage to their credit.
Research from The Pew Charitable Trusts has shown that borrowers want to repay, but they need affordable repayment options to return to good standing and avoid default. And previous data suggests that navigating the default system can be difficult for borrowers—as well as being an inefficient way for the government to recoup taxpayer dollars.
Several evidence-based measures can help borrowers avoid default:
Income-driven repayment (IDR) plans can provide sustained financial relief to struggling borrowers by setting a minimum payment based on their income and family size: The less borrowers earn, the lower their monthly payment.
IDR plans have also been shown to reduce default rates. A Congressional Budget Office report from 2020 found that borrowers who began repayment as part of an IDR plan experienced default at about half the rate of their peers who enrolled in fixed-payment plans. But the Department of Education recently said that IDR applications haven’t been processed since August 2024, creating a backlog of nearly 2 million borrowers who’ve applied for these plans but can’t pay their loans back because they haven’t been informed of their monthly payment—to say nothing of those who haven’t even applied yet.
A Pew survey last year found that 49% of borrowers who weren’t up to date on their payments reported not knowing how to contact either the Department of Education or their loan servicers with questions about their loans—which suggests that some borrowers may not be paying simply because they’re unaware of viable repayment options. Knowing who to contact for assistance with repayment is an ongoing issue for struggling borrowers: previous Pew research examining borrowers who had defaulted across a span of two decades found that nearly half did not know how to contact their servicer prior to the default occurring.
Pew research has also found that borrowers cite official outreach from the Department of Education, or a loan servicer, as the most common reason for eventual enrollment in repayment options such as IDR plans. That suggests that servicers and the department should provide clear, concise, and actionable recommendations for borrowers and should ensure that borrowers have ample access to call centers staffed with well-trained customer service representatives. To make this possible, Congress could provide sufficient funding for Federal Student Aid and its servicing operations.
Data-sharing between the IRS and Department of Education has the potential to streamline burdensome and duplicative income-verification requirements that borrowers must meet to enroll in and remain in IDR plans. Data-sharing could also be used to automatically enroll borrowers into an IDR plan if they fall severely behind on payments, a move that could significantly curb future defaults by connecting borrowers with affordable payments.
Borrowers must provide consent for their income information to be shared in order to benefit from data-sharing's capability. To ensure that borrowers are aware of the automatic income-sharing option, the department should make sure that there are multiple opportunities to provide consent for data-sharing throughout the course of a borrower’s repayment.
Research shows that borrowers who default are often caught in a cycle of nonpayment that is hard to stop, with two-thirds defaulting more than once. By adopting a set of targeted, evidence-based policies that can be implemented immediately, policymakers can help struggling borrowers get back on track and avoid the long-term financial consequences of default, which in turn benefits taxpayers by creating a repayment system that more efficiently engages with borrowers.
Regan Fitzgerald is a senior manager, Brian Denten is an officer, and Ilan Levine is a senior associate with The Pew Charitable Trusts’ student loan initiative.