Highlights
- The U.S. Department of Education (ED) has issued guidance urging colleges and universities to engage with student borrowers regarding their loan status and repayment options
- The guidance emphasizes shared responsibility among the government, student borrowers and colleges and universities to improve student loan repayment outcomes
Following the May 5, 2025, restart of collections on defaulted federal student loans, the U.S. Department of Education (ED) issued guidance urging colleges and universities to engage with student borrowers regarding their loan status and repayment options. ED's guidance emphasizes shared responsibility among the government, student borrowers and colleges and universities to improve student loan repayment outcomes.
On April 21, 2025, ED announced it would resume collections on the defaulted student loan portfolio starting May 5, 2025, after a nearly five-year pause on collection activity since the start of the COVID-19 pandemic in March 2020. ED estimated approximately 5 million borrowers are already in default on their student loans and nearly 4 million additional borrowers are in late-stage delinquency, meaning there could be approximately 10 million borrowers in default over the next few months (or approximately 25 percent of the student loan portfolio).
To collect these loans, ED will be pursuing offsets and garnishment. As of May 5, 2025, ED – together with the U.S. Department of the Treasury – is restarting the Treasury Offset Program, which allows the government to collect delinquent, unpaid debt by offsetting money paid by federal agencies, such as tax refunds or Social Security benefits. ED also anticipates garnishing the wages of borrowers in default. Notice about garnishment is expected as early as this summer.
In addition to regulations prescribing entrance and exit counseling for borrowers and consumer disclosure obligations, the announcement includes two new initiatives:
- Student Borrower Outreach by Institutions. ED
is requesting that no later than June 30, 2025, colleges
and universities reach out to any borrower who ceased enrollment at
the institution since Jan. 1, 2020, and do the following:
- remind borrowers they are obligated to repay any federal student loans that have not been repaid and are not in deferment or forbearance
- suggest borrowers review repayment options on StudentAid.gov
- request borrowers log in to StudentAid.gov and update their
profiles with current contact information and ensure their loans
are in good standing
There is no specific format or timeline for the outreach as long as it covers the items listed above. ED recommends focusing on students who are delinquent on one or more of their loans and suggests it will provide further information to institutions on how to identify students in this category.
- Loan Non-Payment Rate Publication. ED will calculate a "rate of non-payment" by institution, which it will publicly post on the Federal Student Aid (FSA) website in an effort to increase transparency regarding institutional success in counseling student borrowers. This rate will be based on data ED has historically collected and published via the College Scorecard website. ED expects to provide further information about the calculation and publication of these rates in the coming months.
Cohort Default Rates
Institutions should bear in mind that under the Higher Education Act (HEA), colleges and universities must maintain a cohort default rate (CDR) under a certain threshold to maintain eligibility for federal student aid programs. CDRs are issued annually and generally measure the number of students who enter repayment during a given fiscal year and default on their loans prior to the end of the second following fiscal year. If an institution's CDR exceeds 40 percent for a single fiscal year or 30 percent for three consecutive fiscal years, the institution is no longer eligible to participate in federal student aid programs.
Because it takes approximately three years to track each cohort, CDRs generally reflect a cohort that entered repayment several years prior to when the CDR is issued. Because loan repayment was paused for all borrowers for several years after the COVID-19 pandemic, CDRs in recent years have been 0.0. However, the resumption of repayment and collections activities, together with the number of loans in long-term delinquency, may mean a rise in CDRs for institutions in the next couple of years. Colleges and universities should also assess their performance under the CDR regulations as they review borrower loan status and outreach.
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