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Home/Credit & Lending/STUDENT LOAN FORGIVENESS RULING · STUDENT LOAN REPAYMENT POLICY

Treasury Department takes over federal student loan defaults

WH

Willow Hawthorne

student loan forgiveness ruling · Apr 16, 2026

Treasury Department takes over federal student loan defaults

Source: DojiDoji Data Terminal

Defaulted federal student loan borrowers will now be managed by the U.S. Treasury. The Department of Education announced on March 19 that the Treasury Department will take over operations related to all student loan activities in three phases, starting with the collection of defaulted debt.

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Trump Administration's PSLF Rule Narrowly Defines Public Service to Block Forgiveness

Public servants employed by disqualified employers will be ineligible for student loan forgiveness after 10 years of qualifying payments. This outcome is the result of a rule finalized at the end of 2025 by the Trump administration to redefine 'public service' for the Public Service Loan Forgiveness (PSLF) program. The rule bars employers that engage in 'substantial illegal activity,' which the administration identifies as including gender-affirming care or harboring illegal immigrants. If the Department of Education determines an employer employer engaged in illegal activity, the employer is notified and given an opportunity to rebut the findings. If the employer is disqualified, they can reapply for eligibility within 10 years or enter a 'corrective action plan' in cooperation with the department. Democratic lawmakers, led by Sen. Tim Kaine and Rep. Joe Courtney, have announced a resolution under the Congressional Review Act to block the rule, which is set to take effect on July 1.

Treasury Secretary Scott Bessent stated that the Treasury's operational capability and financial expertise will bring financial discipline to the program. The Treasury already manages the Treasury Offset Program, which confiscates tax refunds and Social Security benefits for borrowers in default.

Related Brief12h ago
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Liquidity serves as insurance against student loan payment uncertainty

A borrower may choose to hold cash despite a 3.5 percentage point interest rate deficit. The borrower holds $25,000 in cash earning 3.3% interest while carrying $90,000 in student loans at 6.8%. Mathematically, the spread between the savings rate and the debt interest rate favors paying off the loan. However, student loan policy changes with every administration. Future monthly payments may reach thousands of dollars when forbearance ends in 2027. Holding liquid cash preserves flexibility to meet these payments.

As of December 2025, approximately 7.7 million borrowers with $180 billion in outstanding federal student loans were in default. The Treasury Department will now directly manage the collection process, run the Default Resolution Group, and oversee private collection agencies to return these borrowers to good standing or rehabilitation programs.

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The Clarity Act Targets Cryptocurrency Classification Ambiguities

Digital asset innovation and compliance now depend on the resolution of cryptocurrency classifications and their regulatory treatment. The U.S. Senate is reconvening to consider the Clarity Act to address these ambiguities. The legislative proposal seeks to establish a structured regulatory framework for digital assets.

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