5 Million Targeted for Collection... Warning: "Student Loans May Be Suspended"
Failure to Repay Loans Threatens College Enrollment
The administration of former U.S. President Donald Trump has begun collection efforts targeting American college graduates who have defaulted on their student loans. It is reported that approximately 5 million individuals are subject to these collection actions.
On May 5 (local time), The Wall Street Journal (WSJ) reported that the U.S. Department of Education sent notices to universities warning that if graduates’ loan repayment performance is inadequate, federal student loan support could be suspended. In the notice, the Department of Education warned that schools with high default rates among graduates could face termination of federal student loan programs.
Colleges where 30% of graduates have defaulted over the past three years, or where more than 40% failed to repay loans in the most recent year, are subject to suspension from federal student loan support programs.
Previously, the U.S. Department of Education had suspended student loan repayments since March 2020 as a pandemic response measure. According to the Department, 5 million borrowers are now in default, having delayed repayment for over 360 days, while 4 million are on the verge of default. This accounts for about 25% of all borrowers.
However, the Department of Education recently instructed universities to contact graduates from the past five years to verify whether they are delinquent on their loans and to encourage repayment. The Trump administration has also initiated procedures to collect currently delinquent student loans. According to the WSJ, about 200,000 delinquent borrowers will soon begin receiving notices that their tax refunds or federal welfare benefits may be seized.
Some observers interpret the Trump administration’s actions as a signal that the 'federal student aid' system can also be used to pressure universities. This is because colleges that lose access to federal student loan support may face significant difficulties in attracting future students. The WSJ reported, "This warning is one of a series of measures by the Trump administration targeting universities."
Previously, the Department of Education notified Harvard University that it would freeze billions of dollars in future research grants and other funding until the university complies with the Trump administration’s demands. In a letter to Harvard, Secretary of Education Linda McMahon pressed the university to address the government’s concerns regarding antisemitism on campus, consideration of student race, and the relatively low hiring of conservative faculty members.
In response, a Harvard spokesperson stated, "Harvard will continue to defend against the government’s illegal and excessive actions that seek to suppress research and innovation that make Americans safer."
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