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Federal student loans have undergone a rollercoaster of changes over the past few years, largely in response to the COVID-19 pandemic that disrupted the entire planet. From payment pauses to the resumption of collections, borrowers have faced a dynamic and often confusing landscape.
Now, as of May 2025, the U.S. Department of Education has resumed collections on defaulted federal student loans, including wage garnishments and tax refund seizures.
Professionally speaking, I’ve seen a large number of student loan borrowers starting to get 90 day lates reporting on their credit profiles that have tanked credit scores and left people wondering what they can do to recover from such a significant hit to their credit.
This blog post aims to provide a comprehensive overview of these developments and offer guidance on navigating the current federal student loan environment.
In March 2020, as the COVID-19 pandemic disrupted the global economy, the U.S. government enacted emergency relief measures for federal student loan borrowers. These included suspending loan payments, setting interest rates to 0%, and halting collections on defaulted loans. This relief period was extended multiple times, ultimately lasting until September 2023.
During this time, borrowers were not required to make payments, and interest did not accrue on their loans. This pause provided much-needed financial relief to millions of Americans facing economic uncertainty.
In October 2023, the Department of Education initiated a 12-month “on-ramp” period to ease borrowers back into repayment. During this time, missed payments would not be reported to credit bureaus, and borrowers would not be considered delinquent.
This grace period aimed to provide borrowers with the opportunity to adjust to resuming payments without immediate negative consequences. However, it was crucial for borrowers to use this time to explore repayment options and prepare for the end of the on-ramp period.
The on-ramp period concluded on September 30, 2024.
For those borrowers who were not actively in repayment yet on their loans, their student loans would become delinquent and start accruing interest.
For the first 30 and 60 days of delinquent accounts, the accounts didn’t update or show negative information to the credit bureaus.
Commencing Jan 2025, 90-day delinquencies started showing on credit profiles across the country, significantly impacting federal student loan borrowers’ credit profiles.
Subsequently, in May 2025, the Department of Education resumed collections on defaulted federal student loans. Borrowers who failed to resume payments faced serious consequences, including wage garnishments, tax refund interceptions, and the seizure of Social Security benefits.
As of this resumption, over 5 million borrowers were in default, and millions more were delinquent. The Department emphasized the importance of resuming payments and encouraged borrowers to explore repayment options to avoid these penalties.
It’s essential to distinguish between delinquency and default:
Delinquency: Occurs when a borrower misses a payment. After 90 days of non-payment, federal student loan delinquency is reported to credit bureaus, negatively impacting credit scores.
Default: Occurs when a borrower fails to make payments for 270 days on Direct Loan or Federal Family Education Loan (FFEL). Defaulting on a loan leads to severe consequences, including collections, wage garnishments, and loss of eligibility for additional federal student aid.
Understanding these terms is crucial for borrowers to take timely action and avoid escalating penalties.
If you’re struggling with federal student loans, several options can help you regain good standing:
Loan rehabilitation allows borrowers to remove their loans from default by making nine consecutive, on-time monthly payments. Once rehabilitated, the default status is removed from your credit report. Note that this option is available only once per loan.
Consolidating your defaulted federal student loans into a Direct Consolidation Loan can restore your loans to good standing. To qualify, you must agree to repay the new loan under an income-driven repayment plan.
Income-driven repayment (IDR) plans calculate your monthly payment based on your income and family size, often resulting in lower payments. Enrolling in an IDR plan can help you manage payments and avoid default.
If you’ve missed payments or defaulted, consider the following steps:
Contact Your Loan Servicer: Reach out to discuss your situation and explore options for removing late payments from your credit report.
Explore Forgiveness Programs: Programs like Public Service Loan Forgiveness (PSLF) and IDR forgiveness may offer relief. Review eligibility criteria and application processes.
Stay Informed: Regularly check StudentAid.gov for updates on programs and policies affecting your loans.
March 13, 2020 – CARES Act initiated by President Trump:
Federal student loan payments paused.
Interest rate set to 0%.
Collections on defaulted loans suspended.
August 2020 – December 2020 – Multiple executive orders extended the payment pause.
January 2021 – President Biden extended the pause shortly after taking office.
August 2021 – Department of Education announced another extension due to Delta variant concerns.
April 2022 – Payment pause extended to August 31, 2022.
August 2022 – Extended again to December 31, 2022.
November 2022 – Biden administration attempts broad student debt cancellation (blocked by courts).
December 2022 – Supreme Court agrees to hear the case; payment pause extended until 60 days after a decision or June 30, 2023, whichever comes first.
June 30, 2023 – Supreme Court strikes down Biden’s broad debt cancellation plan.
September 1, 2023 – Interest resumes accruing on federal student loans.
October 1, 2023 – Monthly student loan payments resume for the first time in 3+ years.
October 2023 – September 2024 – Department of Education enacts 12-month “On-Ramp” period:
Missed payments not reported to credit bureaus.
Borrowers not placed in default during this period.
September 30, 2024 – “On-Ramp” period ends.
October 2024 – Delinquencies (missed payments) start being reported to credit bureaus.
Late 2024 – Reports of increasing 90-day late payments.
December 2024 – January 2025 – Notices sent regarding return to collections for defaulted loans.
April 2025 – Department of Education resumes aggressive collection efforts:
Wage garnishments, tax refund seizures, and Social Security offsets for defaulted loans.
Over 5 million borrowers in default and subject to collection.
The story of federal student loans in the post-COVID era is one of sweeping changes, uncertainty, and now—serious consequences. What started as an unprecedented relief effort to protect borrowers during a global crisis has evolved into a complex, often stressful situation for millions of Americans. After years of paused payments and government grace, reality has returned—and for many, it has returned with a vengeance.
With the on-ramp period officially over and collections back in full force, borrowers are now facing the harshest consequences yet: negative credit reporting, wage garnishment, and even the seizure of tax refunds. For those already burdened with financial stress, the weight of student loans may feel heavier than ever.
But here’s the critical takeaway: you still have options.
Whether you’re 90 days late or in full default, there are programs available to help you get back in good standing, protect your paycheck, and potentially even wipe the slate clean. Income-driven repayment plans, loan rehabilitation, and forgiveness programs are not just buzzwords—they’re lifelines.
Now is the time to act. Take control of your situation by contacting your loan servicer, exploring your eligibility for relief, and committing to a plan. Don’t wait until your wages are garnished or your credit score is in free fall. The earlier you engage, the more options you’ll have—and the better chance you’ll have at not just surviving this next chapter, but reclaiming your financial future. The bottom line here is to be proactive and get in contact with your student loan servicer to explore options to bring your loans back in good standing if you’ve fallen behind.
At Credit Mileage, we believe that understanding credit—and leveraging it to your advantage—is a superpower. If you’ve felt lost in the noise of student loan updates, overwhelmed by paperwork, or discouraged by default, know this: you are not alone, and there is a way forward.
Federal student loans may be complicated, but your plan to overcome them doesn’t have to be.
Affiliate and Relationship Disclosure: Credit Mileage may receive compensation from affiliate links included in this post at no extra cost to you. This helps support our mission of providing quality financial education and resources. Additionally, Credit Mileage has a direct business relationship with eCreditAdvisor, which may be mentioned or linked in our content. Our opinions and recommendations remain our own, and we only promote products or services that we believe offer value to our readers. We currently do not have any credit card affiliate links on our website.
Editorial note: The views expressed in this article are solely those of the author and do not reflect the opinions of any bank, credit card company, airline, or hotel chain. None of these organizations have reviewed, approved, or endorsed the content in any way.
Legal and Financial Advice Disclosure: Credit Mileage is not a law firm, and this article is not intended to provide legal or financial advice. This information is meant purely for educational purposes. We strive to offer accurate and up-to-date information, but it is not a substitute for professional financial or legal advice. Always consult with a qualified attorney or financial advisor before making any decisions regarding your financial situation.
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