As federal student loan borrowers navigate the post-pandemic repayment landscape, a recent memo from James Kvaal, former Under Secretary of Education, sheds light on the challenges and proposed strategies to prevent student loan default. While this guidance was left by the previous administration and is not final policy, it offers valuable insights into upcoming changes that could impact millions of borrowers.
What’s Changing in 2025?
For the first time in five years, student loan borrowers who miss payments will face penalties, including forced collections. The Department of Education has emphasized that returning to full repayment comes with risks for borrowers who struggle to make their payments, as well as opportunities for relief if they take the right steps. Here are some key dates to keep in mind:
December 30, 2024 – Credit reporting resumes for borrowers already in default.
January 2025 – New delinquencies will start being reported to credit agencies.
April 2025 – Legal notices for Treasury offsets (such as tax refund seizures) will be sent to defaulted borrowers.
July 2025 – The first offsets will take effect, with Social Security garnishment following soon after.
October 2025 – Wage garnishment for defaulted borrowers will begin.
October – November 2025 – New defaults and associated penalties will be enforced.
What Borrowers Can Do to Stay on Track
Kvaal’s memo stresses that default prevention begins long before a borrower misses a payment. Here are the most critical steps to take now:
Enroll or Stay Enrolled in an Income-Driven Repayment (IDR) Plan
Borrowers who struggle with payments should consider IDR plans, which base monthly payments on income and family size. The Department has launched automatic IDR enrollment for borrowers 75+ days delinquent—provided they’ve given consent to share their tax information.
Take Advantage of New Default Recovery Options
For borrowers already in default, new pathways to affordable repayment will be available in 2025. This includes the ability to enroll in IDR while in default and a more reasonable Social Security offset protection threshold ($1,883 per month).
Watch for Communications from Loan Servicers and the Department of Education
The Department has committed to improving borrower communications by making repayment options clearer, establishing partnerships with public benefit organizations and preventing misleading third-party debt relief scams.
Final Thoughts
While this memo serves as a roadmap for potential policy, it is not yet official. However, borrowers should use this information to stay informed and take proactive steps to avoid delinquency, default, and the financial consequences that come with it. At Student Debt Solutions, we remain committed to keeping you updated and ensuring you have the tools needed to make the best decisions for your financial future. Need help navigating repayment? Explore our platform to review your options and get expert guidance on managing your student loans.
