The federal Department of Education announced recently that it’s launching a new initiative to warn students and their families about the “benefits and risks” of taking on federal student loans.
The outreach will fall under the Office of the Ombudsman, which previously focused on resolving borrower complaints. It has since been renamed the Office of Consumer Education and Ombudsman.
The department said in a news release that the office’s focus was shifting because the outstanding federal student loan portfolio now stands at $1.67 trillion, while “loan defaults and delinquencies remain at record highs” [1].
According to the release, 42.3 million borrowers have student loans. As of June 2025, more than six million borrowers were delinquent and approximately 5.3 million borrowers were in default.
The federal government resumed collections on defaulted student loans in May. Payments on those loans had been paused since March 2020.
President Donald Trump’s One Big Beautiful Bill Act repealed the previous Biden administration’s Saving on a Valuable Education plan, which was designed to lower monthly payments for millions of borrowers. In its announcement that collections would resume, the Department of Education under the current administration referred to loan forgiveness programs as “schemes” and blamed the Biden administration for failing to process income-driven repayment applications.
Consumer advocates criticized the department’s new focus on financial literacy, saying more pressing issues exist. In a CNBC interview, Carolina Rodriguez, director of the Education Debt Consumer Assistance Program in New York, said the move “diverts attention from the urgent need to resolve consumer complaints and systemic servicing failures.”
As of the end of July, more than 1.3 million income-driven repayment (IDR) applications were backlogged. IDR plans limit monthly payments based on a borrower’s income and family size rather than the loan amount [2].
In February, the Trump administration took down the online IDR application system, drawing sharp criticism, and then reopened it in March.
A June report from TransUnion found that less than two months after collections resumed, nearly one in three borrowers were at risk of default [3].
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According to the Federal Student Aid Office, students should research salaries in their chosen field before taking out a student loan. They should also borrow only what they need, since they’ll pay interest on whatever they borrow.
The office also advises that student loan payments “should be only a small percentage of your salary after you graduate.”
Students should track how much they borrow and understand that they must repay their loans even if they don’t complete their education. And if they’re struggling to make payments, they should contact their loan servicer right away.
A student loan is considered delinquent the day after a payment is missed [4]. After 90 days past due, credit bureaus are notified. Approximately 180 days after that — or 270 days past due — the loan enters default, and borrowers may face collection actions.
If your loan goes into default, you’ll need to consider rehabilitation or loan consolidation.
Rehabilitation requirements vary by loan type but often involve making nine consecutive affordable monthly payments for Direct Loans and FFEL Program Loans, or making nine consecutive full monthly payments for Perkins Loans.
If your wages are being garnished, that may continue even during rehabilitation, and those garnished amounts don’t count toward the nine required payments.
Loan consolidation lets borrowers combine one or more loans into a new loan. But any unpaid interest is added to the principal, and you’ll pay interest on the new, higher total — meaning you’ll pay more over time.
If the return of loan collections is making it hard to pay your bills, contact your loan servicer before you miss a payment.
You can also apply for a deferment or forbearance to temporarily pause or reduce payments. Interest may still accrue, and those pauses can affect your progress toward loan forgiveness. You should also check if you qualify for any forgiveness programs.
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[1]. CNBC. “Trump administration to warn families about student debt risks amid record-high defaults”
[2]. Federal Student Aid. “Income-Driven Repayment (IDR) Plan Request”
[3]. TransUnion. “Following the Resumption of Federal Collection Activities in May, Nearly One in Three Federal Student Loan Borrowers Find Themselves at Risk for Default”
[4]. Federal Student Aid. “Student Loan Delinquency and Default”
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
