The U.S. Department of the Treasury announced the creation of a “Default Loans Support Center” this week to assist borrowers who have defaulted on federal student loans. The online portal will offer information and resources to help defaulted borrowers understand their options for resolving delinquent accounts and returning to current status on their loans.
According to data released earlier in the month by the Education Department, approximately 9.3 million federal student loan borrowers were in default as of June 30. This represents a substantial increase from roughly 6.2 million borrowers in default at the same point in 2016, reflecting a roughly 50% rise over the past decade. A borrower is considered in default when no scheduled payment has been made for at least 270 days.
The surge in defaults has been attributed to multiple factors, including the conclusion of the pandemic-related payment pause and the discontinuation of the Biden administration’s SAVE repayment plan, which had provided very low monthly payment options to millions of borrowers. Additionally, unemployment rates among recent college graduates have been climbing.
Treasury’s increased role in student loan collection follows an administration announcement in March that the department would take on responsibility for collecting defaulted student loans. This shift aligns with the administration’s stated goal of transferring Education Department functions to other federal agencies and state governments. Treasury Secretary Scott Bessent characterized the effort as part of the administration’s plan to restore fiscal responsibility to the nation’s $1.7 trillion federal student loan portfolio.
Historically, the Treasury Department has participated in student loan collection efforts. However, internal Treasury findings from 2016 indicated that the department achieved lower collection rates compared to private collection companies.
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