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By Hugh Cameron
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A U.S. budget watchdog has criticized the Trump administration for putting off plans for involuntary student loan collections, labelling it reminiscent of the deficit-increasing actions taken by his predecessor and warning this could sacrifice billions of dollars annually for the government.
On Friday, the Department of Education announced that it would be indefinitely delaying plans to garnish the wages of defaulted borrowers, saying the pause will allow it to implement "major student loan repayment reforms."
However, the Committee for a Responsible Federal Budget (CRFB), a D.C.-based think tank focused on federal fiscal discipline and lowering the deficit, called the announcement an "incoherent political giveaway," and said it was "beyond ridiculous" to revive pandemic-era pauses on student loan collections.
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Newsweek has contacted the Department of Education via email for comment.
Why It Matters
Americans collectively hold around $1.7 trillion in student loan debt, according to the latest data from the New York Federal Reserve, exacerbating the financial strains facing millions of households also struggling with cost-of-living pressures, labor market weakness and other forms of debt.
The end of pandemic-era student loan forgiveness and the resumption in collections last year have already driven significant increases in delinquencies. But while the Department of Education’s pause on forced collections will provide a temporary reprieve for borrowers, groups such as the CRFB maintain that these are necessary to help address some the government’s glaring fiscal challenges.
What To Know
Last May, the Department of Education resumed student loan collections after a five-year hiatus amid the Covid pandemic, and said that this would protect taxpayers from "shouldering the cost of federal student loans that borrowers willingly undertook to finance their postsecondary education."
In addition, the department said it planned to commence wage garnishments and involuntary collections for defaulted borrowers later in the year. In December, it told ABC News that this could begin as soon as January.
But in Friday’s announcement, the department said a temporary delay was needed to implement repayment reforms and to give borrowers more time to evaluate new repayment options that are set to become available in July. As well as involuntary collections, the department is also pausing tax refund seizures by the Treasury Department.
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"The Department determined that involuntary collection efforts such as Administrative Wage Garnishment and the Treasury Offset Program will function more efficiently and fairly after the Trump Administration implements significant improvements to our broken student loan system," said Under Secretary of Education Nicholas Kent.
But the CRFB said the announcement effectively amounts to an extension of the initial pause and another form of debt "cancellation" and said this could result in the loss of "up to $5 billion per year in collection and lead loan balances to balloon."
"This is an incoherent political giveaway, doubling down on the debt cancelation from the Biden ere," said CRFB President Maya MacGuineas.
"We’re not in a pandemic or financial crisis or deep recession," MacGuineas added. "There’s no justification for emergency action on student debt, and no good reason the for the President to back down on efforts to actually begin collecting debt payments again."
What People Are Saying
Under Secretary of Education Nicholas Kent, said: "After the Biden Administration misled borrowers into believing their student loans would not need to be repaid, the Trump Administration is committed to helping student and parent borrowers resume regular, on-time repayment, with more clear and affordable options, which will support a stronger financial future for borrowers and enhance the long-term health of the federal student loan portfolio."
CRFB President Maya MacGuineas, said: "Preventing the actual collection of the debt puts that all at risk. Not only will it increase costs to the taxpayer, but it will also actually worsen affordability challenges by allowing student loan burdens to balloon and putting upward pressure on interest rates and inflation."
What Happens Next
The Department of Education did not give a timeline for when the pause would end, and has encouraged borrowers to use this period to "explore their options for resolving their defaulted student loans with the defaulted federal loan servicer."
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