https://www.washingtonsun.com/economy/trump-aides-plan-penalize-defaulting-student-loan-borrowers

Trump Aides Are Getting Ready to Penalize Defaulting Student Loan Borrowers

Trump administration officials are preparing to impose financial penalties on millions of Americans in default on their federal student loans next year, according to five sources familiar with the matter.

The Treasury Department is moving forward with plans to hire private debt collectors, three of the sources said, possibly as soon as November. The sources said those plans are unlikely to be announced before the midterm elections.

The planning — which has not been previously reported — shows the administration gearing up to move forward with a policy it previously put on hold out of concern for the potential consequences for the nearly 10 million borrowers in default.

The administration has grappled with internal divisions between federal agencies over how to manage the government’s $1.7 trillion student loan portfolio. Last year, the White House Office of Management and Budget began assisting the Education Department in preparing to seize federal benefits and wages from defaulted borrowers, the sources said. Treasury Department officials blocked that effort, expressing concern about the economic costs of taking punitive measures against workers.

Since then, Treasury officials have unveiled a new online portal that makes it easier for students to understand what they owe and how to pay in hopes of avoiding further penalties. The administration’s preference remains to get borrowers into a plan where they will make voluntary payments.

While some administration officials are pushing to garnish benefits and wages for the current tax year — meaning for the tax year deadline of April 15, 2027 — sources cautioned that it may be delayed again, as the administration wants to ensure that Treasury’s new Defaulted Loans Support Center is working.

“They wanted to make sure the infrastructure is in place to receive borrowers trying to get out of default — you can bet a lot of people will get calls from borrowers saying, ‘What’s going on? How do I make sure this won’t happen again?,’” one of the sources said. “It’s definitely something they’re thinking about. It would be politically insane to do this before the midterms — but 2027 probably makes a little more sense to give Treasury time to get contracts signed, up and running.”

OMB and Treasury declined to comment. The Education Department said in a statement: “We don’t respond to fishing expeditions.”

The government has two primary programs to claw back money from defaulting borrowers. One would seize expected payments when they follow taxes, such as expected tax refunds, Social Security payments, or the earned income tax credit and child tax credit. The other would garnish wages by requiring workers’ employers to fork over what they owe to the government instead.

Last year, Treasury officials expressed concerns that too aggressively pursuing these measures could hurt low-income borrowers, two sources said. Staff also said they pointed out to senior Treasury officials that scores of Trump supporters would be seriously hurt by going after the wages and benefits of workers who are in many cases struggling to hold onto their jobs. Their message was, “This is not who you think it is. The demographics are not good for us,” one source said.

Matt Chingos, a Treasury official who worked as a Senate Republican staffer, has been spearheading the effort to both restart collections while mitigating potential consequences.

Treasury’s concerns demonstrate the practical difficulty of Republicans’ opposition to student debt forgiveness.

Treasury’s push last year to postpone collections has cost taxpayers about $5 billion so far, according to Marc Goldwein, senior vice president of the Committee for a Responsible Federal Budget, a nonpartisan think tank. That amount grows the longer the administration waits.

“They’ve done the same thing they criticized Biden for — we shouldn’t be canceling student debt for people who just don’t want to pay,” Goldwein said. “It doesn’t create a sustainable student loan program.”

Preston Cooper, a student debt expert at the American Enterprise Institute, a center-right think tank, has argued that restarting debt collection should involve a widespread effort from multiple government agencies to try to get borrowers from defaulting in the first place. He has suggested measures including pushing colleges to spread the message, distributing warnings at a “large scale” and having the Education Department send out warnings.

“We should allow them to do the right thing and not hit them with excessive fees and allow them to rehabilitate and get on an affordable repayment plan,” Cooper said. “Somewhere between treating them all as deadbeats and forgiving all the loans is probably the right solution.”

Advocates for student borrowers see efforts to punish defaulting debtors as a cruel way to extract money from borrowers who are already struggling with high inflation and rising debt burdens.

They also see the Trump administration engaging in political opportunism in delaying an announcement on their plans until after the upcoming midterm elections.

The Treasury Department may not even have the adequate data necessary to certify the debts for collection, which is a legal prerequisite for carrying them out, according to Michael Pierce, the executive director of Protect Borrowers, an advocacy organization.

The freeze on student loan payments and interest, initially implemented under Trump’s first term, also changed expectations for millions of borrowers.

“Restarting debt collection the moment any political accountability has passed just shows how little interest Trump has in helping working families stay afloat,” Pierce said. “What comes next will be a catastrophe for families across the country — seized tax refunds, garnished wages, and even less money to put food on the table or make rent.”

(http://www.autoadmit.com/thread.php?thread_id=5913986&forum_id=2#50197170)

3 cheers for the boomers!

(http://www.autoadmit.com/thread.php?thread_id=5913986&forum_id=2#50197176)

CEOs, shareholders and other top 1% folks, oh well if they made a mistake, we need to socialize the losses and keep the economy moving on! Just this one more time. Next time we will hold them accountable! But lets not hurt my 401k right now

(http://www.autoadmit.com/thread.php?thread_id=5913986&forum_id=2#50197863)

Rather than making up stances I don't take, try addressing my point about who should more rightly take the burden than the motherfucker who took out the loan

(http://www.autoadmit.com/thread.php?thread_id=5913986&forum_id=2#50197878)

a better example would be letting a shoplifter go because murders never get caught, but your 152 LSAT shows you dont understand formal logic

(http://www.autoadmit.com/thread.php?thread_id=5913986&forum_id=2#50198267)

Amd yeah I am in favor of arresting shoplifters even if we dont catch all the murderers

(http://www.autoadmit.com/thread.php?thread_id=5913986&forum_id=2#50198302)

Then we could at least talk about whether that makes sense (it doesn't) and how we target the class of people who are captured by the rationale (well-off boomers). That's a real conversation with potential utility

Instead, you strawmanned some shit and came off like a retard

(http://www.autoadmit.com/thread.php?thread_id=5913986&forum_id=2#50198271)

Did you really think my point was, let everyone get off for free! No one should pay anything ever!

How was Cooley bro?

(http://www.autoadmit.com/thread.php?thread_id=5913986&forum_id=2#50198330)

It's mildly amusing that I more clearly elaborated your position than you did, and yet you're still lashing out about things I never said or implied

(http://www.autoadmit.com/thread.php?thread_id=5913986&forum_id=2#50198344)

But college students generally come from wealthier backgrounds than the average population. Lol at justifying this as a welfare program

(http://www.autoadmit.com/thread.php?thread_id=5913986&forum_id=2#50197343)

Redditards like gunneratttt in shambles

(http://www.autoadmit.com/thread.php?thread_id=5913986&forum_id=2#50197337)

https://x.com/SprinterPress/status/2112537299791597636/photo/1

(http://www.autoadmit.com/thread.php?thread_id=5913986&forum_id=2#50197849)

Proles simply dont go to college, and those that do tend to major in practical fields where they can pay back the loans.

(http://www.autoadmit.com/thread.php?thread_id=5913986&forum_id=2#50198291)

It sounds boomerific, but until very recently, people could still put themselves through school pretty easily if they went locally (and that local isn't the flagship state school or other expensive option). Instead of exercising common sense, they took terrible advice about going to the best place you could get into or whatever

(http://www.autoadmit.com/thread.php?thread_id=5913986&forum_id=2#50198406)

(http://www.autoadmit.com/thread.php?thread_id=5913986&forum_id=2#50198233)