Why Repaying Federal Student Loans Is a Fiscal—and Moral—Imperative

By Alex Chediak Published on April 28, 2025

For the last five years, the U.S. Department of Education has not been asking anyone to replay their student loans. But last week, Education Secretary Linda McMahon announced collections will resume on May 5.

President Donald Trump hit the pause button on mandatory payments in 2020, when the whole world was suffering from a frozen, locked-down economy. But Joe Biden continued it into 2022, after the economy had fully reopened—and then did nothing more. Why?

In August 2022, as I predicted in an article for The Stream, Biden unlawfully proposed a student debt-cancellation plan, promising to forgive up to $20,000 for eligible borrowers who met income thresholds. In the following months, more than 26 million borrowers applied, and about 16 million of them were approved for debt forgiveness before legal challenges forced the federal government to stop the madness.

But in the meantime, it dramatically helped Democrats at the ballot box. Young professionals voted blue in droves. As a result, the “red wave” many had anticipated in the 2022 midterm elections never materialized. In June 2023, the U.S. Supreme Court ruled 6-3 against Biden’s executive order, putting the kibosh on his overreach.

Just the Stats

The 0% interest rate on federal student loans ended on September 1, 2023, and Congress ordered payments to restart in October 2023. But, according to the new Trump administration, even after that date, the Biden-Harris folks refused to resume collections for borrowers in default.

This sends a confusing message. Is Uncle Sam serious about collecting the funds that aren’t being repaid or not? After all, they’ll either be repaid by the borrowers or passed on to the taxpayers. There is no such thing as a free lunch—or a free college education.

To be clear: It’s not that all borrowers have been delaying payment. Many have been faithfully sending in their checks month after month. They’ve seen the principle on their loans reduced, perhaps even all the way to zero.

But there’s another group which has not been making payments, and whose delinquency has formally lapsed into default (typically at the nine-month mark). And this group of individuals has not been compelled to pay since COVID.

Here’s the shocking truth about where things currently stand:

Seven million borrowers collectively owe more than $1.6 trillion in student debt.
Three million borrowers are in default. That’s about one out every eight borrowers.
About four million borrowers are in late-stage delinquency (91-180 days).
Only 38% of borrowers are up to date in repaying their student loans.

Think of that 38% number for a moment. What bank or business could afford to take a temporary and possibly permanent loss on 62% of its investment? You’d need a high profit margin on the remaining 38% to pencil it out. But here’s an even weirder stat:

nine million borrowers have been unable to begin repayment because the Biden administration stopped processing applications for programs like Income-Based Repayment (where borrowers’ monthly payments are set at a manageable percentage of their discretionary income).

Here’s the bottom line: It’s appropriate for the government to resume taking measures to recoup what was borrowed. And those who have defaulted on their student loans deserve a clear path toward achieving financial freedom.

Progressives May Howl

We may hear weeping and gnashing of teeth about how heartless the Trump administration must be to implement what are politely called “involuntary collection activities.” These include withholding tax refunds, a portion of any Social Security benefits, and/or federal salaries (for those who have them).

Later this summer, 30-day notices of wage garnishments will be sent to all borrowers in default and their employers. This wage garnishment is capped at 15% of an employee’s discretionary income.

What progressives won’t tell you is that this resumption of collection activities will be paired with an outreach campaign to make sure borrowers know how get back on the repayment plan and out of default. It’s also just that: a resumption of collection. It’s standard stuff we were doing before COVID.

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To get back on track, borrowers have a few options. The one that probably makes the most sense for most defaulters is working with the loan holder to “calculate an alternative monthly payment based on the amount of your monthly income that remains after reasonable amounts for your monthly expenses have been subtracted.” (Note the term “expenses” there, meaning “essential needs” like rent and groceries —not Starbucks runs or Netflix subscriptions.)

Hopefully the 9.7 million borrowers who haven’t been paying can get back on a workable plan toward reducing their debt and getting free. Income-Driven Repayment (IDR) plans offer to forgive remaining balances after 20-25 years’ worth of qualifying payments have been received.

The other societal benefit is the message it sends to those who have yet to incur student debt: Borrow responsibly, knowing that you aren’t getting a freebie. You’ll have to pay it back. Don’t overconsume, borrowing big money for a degree that’s not likely to command a big income. A good (and conservative) rule of thumb is not to borrow more than half of the annual salary you expect to earn in your first job after college .

Alex Chediak (Ph.D., U.C. Berkeley) is a professor and the author of Thriving at College (Tyndale House, 2011), a roadmap for how students can best navigate the challenges of their college years. His latest book is Beating the College Debt Trap. Learn more about him at www.alexchediak.com or follow him on Twitter (@chediak).