Pandemic Debt Holiday Ends: Time to Pay Student Loans

After five years of pandemic-era relief, federal student loan borrowers are facing a harsh reality check. The $1.6 trillion student debt machine is cranking back to life, and millions of Americans aren’t ready. With payments now mandatory again, the government’s message is crystal clear: vacation’s over, pay up.

The $1.6 trillion debt holiday is over, and America’s borrowers are woefully unprepared for the wake-up call.

The numbers paint a grim picture. Over 5.3 million borrowers are already in default, and nearly a quarter of all federal student loan borrowers could join them soon. Let that sink in. Only 38% of the 42.7 million borrowers are actually making their payments on time. The rest? They’re either falling behind, hiding in forbearance, or hoping for another miracle extension.

Starting May 5, 2025, the consequences get real. Wage garnishment. Tax refund seizures. Social Security offsets. The Trump administration isn’t playing around with collections anymore. After a mandatory 30-day notice period, the government will start taking what it’s owed—whether borrowers are ready or not.

This couldn’t come at a worse time economically. Consumer spending is weak. Credit markets are tight. And those pandemic savings everyone was hoarding? Gone. Poof. Most borrowers will have to cut back on other spending just to make minimum payments. This marks the end of a significant Treasury Offset Program pause that had protected defaulted borrowers since March 2020.

The math is especially brutal for lower-income households. They may owe less in absolute terms, but relative to their income, the debt burden is crushing. The two lowest income quintiles collectively owe about $7 billion annually. Money that won’t be spent on, you know, food or rent.

There are options, sure. The Income-Driven Repayment system is up and running as of March 2025. But steering through government paperwork isn’t exactly America’s favorite pastime. Adding to the confusion, over 40% of borrowers will be switching loan servicers, requiring them to create new logins and re-enroll in payment plans. For those who figure it out, payments could be lower based on discretionary income.

Meanwhile, the political fighting continues over who can forgive what and how much. Lots of big talk, not much action.

For millions of Americans who haven’t made a payment since March 2020, the adjustment will be jarring. Five years is long enough to forget you even had student loans in the first place. Now reality bites back, and the bite marks will show up in everything from credit scores to retirement plans. Many borrowers are already seeing the impact as the Department has begun reporting missed payments to credit bureaus, affecting their ability to secure mortgages or other loans.

The message is simple: The pandemic debt holiday is over. Time to pay the piper.