More Than 9.3 Million Federal Student Loan Recipients Were in Default by June 30

Three people familiar with administration discussions said the U.S. Department of the Treasury is preparing to hire private debt collectors as soon as November, while five expect a broader return to federal student loan collections in 2027.

Treasury has not publicly announced a plan to hire private debt collectors. The Education Department’s Jan. 16 pause on involuntary collections set no restart date.

As of June 30, more than 9.3 million recipients were in default, with $234 billion in outstanding federal student loans. Defaults represented roughly 14% of the $1.64 trillion federally managed portfolio.

The Education Department delayed involuntary collections while it worked on repayment improvements. The measures include wage garnishment, which can take up to 15% of a paycheck, and the Treasury Offset Program, which can withhold tax refunds or certain federal benefits.

Treasury and the Education Department launched the Defaulted Loans Support Center on Sept. 30. Borrowers can use the portal to apply to rehabilitate or consolidate defaulted loans, make payments, and review repayment and discharge options. The launch did not announce a resumption of involuntary collections.

Treasury’s March 20 notice sought industry input on a draft solicitation as market research; it did not award a contract.

People familiar with the discussions said some officials have considered applying wage and benefit collections to the current tax year, with April 15, 2027, as a possible deadline. They said the timing could slip while Treasury ensures the portal is working. The date is not a public restart deadline.

Michael Pierce, executive director of Protect Borrowers, warned that collections could mean “seized tax refunds, garnished wages, and even less money to put food on the table or make rent.”