Education Secretary says department is resuming collections; committee members raise concerns about defaults and servicing confusion

Education Secretary McMahon told the House Appropriations subcommittee that the Department of Education has begun steps to return federal student loan borrowers to repayment following pandemic-era pauses and previous administration actions that created “confusion in the loan servicing system.”

McMahon said the department published payment-option information at studentaid.gov, sent letters on May 5 and, since those letters, has collected “almost a hundred million dollars” in back payments through voluntary payments and restructuring. She said the department is “on the right track” to resume collections.

Members said the problem is large: the subcommittee cited testimony that roughly one-quarter of the federal student loan portfolio is late or in default and that only about 38 percent of borrowers are in repayment. Chairman Aderholt and other members asked how the department is directing struggling borrowers to available repayment options and whether the department will protect borrower data amid staffing and contractor changes.

Why it matters: About 43 million borrowers were affected by the pandemic pause on payments; a substantial share remain delinquent or in default, which has financial consequences for borrowers and potential budget implications for federal loan portfolios.

Details and debate: McMahon framed the messaging under the prior administration as confusing and said borrowers had been told forgiveness was “always on the horizon,” which discouraged voluntary payments. She also said the department is coordinating with Treasury on collection efforts. Members sought more detail on outreach to struggling borrowers and on how servicing issues will be handled as repayment resumes.

Next steps: Committee members asked for more detail on borrower outreach, default-prevention counseling and the department’s operational plans for servicers as repayment restarts.