The United States faces critical challenges related to the federal student loan programs. According to estimates from the U.S. Department of Education (Department), only 38% of Direct Loan and Department-held Federal Family Education Loan Program borrowers are in repayment and current on their student loans. We also estimate that almost 25% of the entire portfolio is either in default or a late stage of delinquency.
Given these challenges, the Department is taking immediate steps to engage student borrowers and support the repayment of their federal student loans. As announced in an April 21, 2025, press release, today, the Department will resume collections on its defaulted federal student loan portfolio with the restart the Treasury Offset Program and, later this summer, Administrative Wage Garnishment. The Department has also initiated an outreach campaign to remind all borrowers of their repayment obligations and provide resources and support to assist them in selecting the best repayment plan for their circumstances. The Department has also launched an enhanced income-driven repayment (IDR) plan process, simplifying how borrowers enroll in IDR plans and eliminating the need for many borrowers to manually recertify their income each year.
Maintaining the integrity of the Title IV, Higher Education Act of 1965 (HEA) loan programs has always been a shared responsibility among student borrowers, the Department, and participating institutions. Although borrowers have the primary responsibility for repaying their student loans, institutions play a key role in the Department’s ongoing efforts to improve loan repayment outcomes, especially as the cost of college set solely by institutions has continued to skyrocket. Institutions are responsible for providing clear and accurate information about repayment to borrowers through entrance and exit counseling, and colleges and universities are responsible for disclosing annual tuition and fees and the net price to students and their families on the costs of a postsecondary education. The financial aid community has demonstrated its commitment to providing direct advice and counsel to students regarding their borrowing, but institutions must refocus and expand these efforts as pandemic flexibilities come to an end.
Under section 435 of the HEA, institutions are required to keep their cohort default rates (CDR) low and will lose eligibility for federal student assistance, including Pell Grants and federal student loans, if their CDR exceeds 40% for a single year or 30% for three consecutive years. The Department reminds institutions that the repayment pause on student loans ended in October 2023, and CDRs published in 2026 will include borrowers who entered repayment in 2023 and defaulted in 2023, 2024, or 2025. The Department further reminds institutions that those borrowers whose delinquency or default status was reset in September 2024 could enter technical default status / be delinquent on their loans for more than 270 days beginning in June and default this summer. As such, we strongly urge all institutions to begin proactive and sustained outreach to former students who are delinquent or in default on their loans to ensure that such institutions will not face high CDRs next year and lose access to federal student aid.
Given the urgent need to ensure that more student borrowers enter repayment and stay current on their loans, the Secretary urges each participating institution to provide the following information to all borrowers who ceased to be enrolled at the institution since January 1, 2020, and for whom they have contact information:
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Remind the borrower that he or she is obligated to repay any federal student loans that have not been repaid and are not in deferment or forbearance;
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Suggest that the borrower review information on StudentAid.gov about repayment options; and
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Request that the borrower log into StudentAid.gov using their StudentAid.gov username and password to update their profile with current contact information and ensure that their loans are in good standing.
The Department urges that this outreach be performed no later than June 30, 2025. We do not stipulate how institutions reach out to borrowers, nor the specific information provided, as long as it covers the three categories described above.
We also encourage institutions to focus their initial outreach on students who are delinquent on one or more of their loans in order to prevent defaults. We will provide additional information in the future to assist schools with identifying and communicating with these borrowers.
The Department is committed to overseeing the federal student loan programs with fairness and integrity for students, institutions, and taxpayers. To that end, the Department believes that greater transparency is needed regarding institutional success in counseling borrowers and helping them get into good standing on their loans.
The Department maintains data on the repayment status of federal student loan borrowers and in the past has provided information in the College Scorecard about the status of each institution’s borrowers at several intervals after they enter repayment. The Department plans to use this data to calculate rates of nonpayment by institution and will publish this information on the Federal Student Aid Data Center later this month. The Department will provide more information about this publication process soon.
Thank you for your continued efforts to maintain the integrity of the Title IV, HEA loan programs. The Department values its institutional partners and looks forward to continued collaboration to place borrowers on the path to sustainable repayment of their loans.