The U.S. Department of Education has announced that it will resume collections on defaulted federal student loans starting Monday, May 5. This marks the end of a pause that began in March 2020 due to the COVID-19 pandemic.

The average amount of student loan debt college graduates leave with in the United States is approximately $29,300 for those earning a bachelor’s degree from a public or private nonprofit institution. Estimates for the class of 2025 suggest this figure could be as high as $40,000 due to rising tuition and interest rates. For graduate degrees, the average debt is much higher: master’s degree holders typically owe between $45,000 and $71,000, while professional degrees (such as law or medicine) can result in debts exceeding $100,000.

The standard federal student loan repayment plan is 10 years (120 equal monthly payments). However, less than 40% of borrowers pay off their loans within this 10-year window.

Many borrowers take closer to 20 years to fully repay their student loans, especially if they use income-driven repayment plans, which allow for lower monthly payments over a longer period (typically 20–25 years). Extended and income-driven plans can stretch repayment up to 25 years or more, with some borrowers still making payments into their 40s and 50s.

As California governor (1967–1975), Ronald Reagan spearheaded an ideological assault on publicly funded education. Inheriting a tuition-free University of California system, Reagan slashed state higher education funding by 20% and imposed tuition for the first time, arguing taxpayers should not subsidize “intellectual curiosity”.

His administration framed education as a private investment. This marked a departure from the post-WWII model, where states covered 65% of college costs and federal grants supplemented the remainder.

Reagan’s presidency (1981–1989) accelerated this privatization nationally. The Omnibus Budget Reconciliation Act of 1981 gutted need-based aid:

• Pell Grants for low-income students were reduced by $500 million, disqualifying 300,000 recipients
• Social Security educational benefits, which provided $2 billion annually to dependents of deceased or disabled workers, were phased out.
• Guaranteed Student Loan (GSL) eligibility tightened, excluding families earning over $32,500.

These cuts coincided with tuition hikes at public universities, which rose 27% between 1980–1985. Federal aid shifted from grants to loans, with subsidized lending programs like Sallie Mae (created in 1972) expanding rapidly. By 1985, loans constituted 52% of federal student aid, up from 20% in 1970. Reagan’s budget director, David Stockman, openly acknowledged targeting middle-income families to promote “parent and student responsibility”.

Student debt has stifled generational wealth accumulation, particularly for marginalized groups:

• Homeownership: 51% of renters with student debt have delayed buying homes. From 2007–2022, homeownership rates among graduates fell 3.52% as debt balances surged 193%.
• Entrepreneurship: Borrowers owing >$30,000 are 11% less likely to start businesses; those with $10,000 in debt earn 42% less from ventures than debt-free peers.
• Career Choices: Graduates prioritize higher-paying jobs over public service or socially impactful roles. Medical students with debt, for example, disproportionately avoid primary care specialties.

Modern disparities reflect Reagan’s foundational shifts:

• States now fund only 35% of public university costs (vs. 65% pre-1980), transferring the burden to students.
• Pell Grants cover just 28% of average tuition, down from 79% in 1975.
• For-profit colleges, which enroll 10% of students but account for 35% of defaults, flourished under deregulated lending.

Approximately 5.3 million borrowers are currently in default, with another 4 million at risk. Beginning in early May, borrowers who have defaulted on their federal student loans-defined as failing to make payments for at least 270 days-will face renewed collection efforts. The Department of Education will utilize the Treasury Offset Program to seize overdue funds from tax refunds, wages, and even Social Security benefits for seniors with outstanding debts. Over the next two weeks, affected borrowers will receive email notifications outlining their status and options for resolving their debts.

If no action is taken, the Department will escalate to administrative wage garnishment later this summer, meaning borrowers could see automatic deductions from their paychecks.

The resumption of collections follows years of pandemic-era relief, first initiated in March 2020 and extended multiple times under both the Trump and Biden administrations. President Biden’s efforts to provide broad student debt relief-including mass forgiveness and the SAVE plan have faced legal setbacks, with the Supreme Court blocking sweeping forgiveness measures and SAVE now stalled in court.

Meanwhile, Republican lawmakers have proposed reforms that could further restrict access to affordable repayment options and eliminate some forgiveness programs, raising concerns among borrower advocates about long-term debt burdens.

Borrowers in default are encouraged to explore options such as loan rehabilitation and consolidation to regain good standing.

For more information and assistance, borrowers can visit StudentAid.gov.