Treasury to Oversee Student Loan Collections, Affecting 7.7 Million Defaulted Borrowers

Approximately 7.7 million borrowers with $180 billion in defaulted federal student loans will now have their accounts managed by the U.S. Treasury. The Department of Education announced on March 19 that the Treasury will take over operations related to student loan collections in three phases, beginning with defaulted accounts. The Treasury will use private collection agencies to help these borrowers enter rehabilitation programs or return to good standing. Treasury Secretary Scott Bessent called the move a step toward better financial discipline and cost savings for taxpayers. The Treasury already collects involuntary payments through the Treasury Offset Program, seizing tax refunds and other federal benefits from borrowers in default. However, a 2014-15 pilot showed that Treasury's collection efforts were less successful than current Education Department methods. Critics warn the shift may increase confusion and reduce access to relief for vulnerable borrowers.