Collections Are Halted on Over a Million Student-Loan Borrowers in Default

More than a million borrowers who have defaulted on their federally backed student loans will get some temporary relief, the U.S. Department of Education announced on Tuesday. The move is the latest in a series of incremental measures to ease the financial burden on student-loan borrowers.

The action applies to people who borrowed under the now-defunct Family Federal Education Loan Program, or FFEL, which offered loans from private banks that were guaranteed by the federal government. The program ended in 2010, when the Education Department began offering loans directly to students. Borrowers with direct loans have been eligible for a pause in repayment, interest, and collections on defaulted loans during the pandemic.

The department is now extending relief to some borrowers who still hold the private loans: 1.14 million borrowers who are in default on the loans will no longer accrue interest, retroactive to March 13, 2020, and will not be subject to collection on those debts. The move will prevent the government from garnishing the federal tax refunds of more than 800,000 borrowers with FFEL loans, according to department figures.

In addition, the department said it would work to erase the record of default from the credit history of those borrowers and would refund any amounts that had been seized during the past year. The department’s move does not extend to borrowers who were not in default, an agency official explained to reporters, because those debts are still controlled by private entities.