Today, the U.S. Department of Education (Department) issued a ‘Dear Colleague Letter’ (DCL) to institutions of higher education reminding them of their shared responsibility under Title IV of the Higher Education Act of 1965 (HEA) to support student loan borrowers. The Department issued the guidance on the same day it is resuming involuntary collections on student loans, which have been paused since the early days of the Covid-19 pandemic.
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 colleges and universities continues to skyrocket. Universities can ensure that their former students understand their responsibility to repay their student loans and that they know how to access their StudentAid.gov accounts.
“As we begin to help defaulted borrowers back into repayment, we must also fix a broken higher education finance system that has put upward pressure on tuition rates without ensuring that colleges and universities are delivering a high-value degree to students,” said U.S. Secretary of Education Linda McMahon. “For too long, insufficient transparency and accountability structures have allowed U.S. universities to saddle students with enormous debt loads without paying enough attention to whether their own graduates are truly prepared to succeed in the labor market.”
In the DCL, the Secretary urges all institutions of higher education that receive federal funding assistance to reach out to all former students to remind them of their obligation to repay any federal student loan that is not in deferment or forbearance, and that they do so before June 30, 2025. The Department also notes that it maintains data on the repayment status of federal student loan borrowers and provides information in the College Scorecard about the status of each institution’s borrowers after they enter repayment. The Department plans to use the data to calculate rates of nonrepayment by institution and will publish the information on the Federal Aid Data Center later this month.
The DCL also notes that, under Section 435 of the HEA, institutions are required to keep their cohort default rates (CDR) low or they could lose eligibility for federal student assistance, including Pell Grants and federal student loans. The Department urges 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 risk losing access to federal student aid.
Involuntary Collections Efforts and Support for Struggling Borrowers
Starting today, approximately 195,000 defaulted student loan borrowers will begin receiving an official 30-day notice from the U.S. Department of Treasury notifying them that their federal benefits will be subjected to the Treasury Offset Program. The first monthly benefit checks subject to offset are those scheduled for early June. Later this summer, all 5.3 million defaulted borrowers will receive a notice from Treasury that their earnings will be subject to administrative wage garnishment.
All borrowers in default will continue to receive email communications from FSA making them aware of these developments and urging them to contact the Default Resolution Group to make a monthly payment, enroll in an income-driven repayment (IDR) plan, or sign up for loan rehabilitation. FSA has increased customer service capacity and extended call center hours to ensure borrowers have access to the information and support they need to understand their repayment options, resume making payments on their loans, and rehabilitate defaulted loans when necessary.
The Department has also authorized guaranty agencies to begin involuntary collections activities on loans under the Federal Family Education Loan Program. All FSA collection activities are required under the HEA and conducted only after student and parent borrowers have been provided sufficient notice and opportunity to repay their loans under the law.
Detailed information to help borrowers get out of default is also available at StudentAid.gov/end-default.