Student loans upheaval

The Education and Treasury Departments on March 19 announced a “Federal Student Assistance Partnership” that begins with Treasury taking operational responsibility for collecting defaulted federal student loans as the first phase of a planned three‑stage transfer. (ed.gov) Federal Student Aid reports the outstanding federal student‑loan portfolio includes roughly 42.3 million recipients and about $1.67 trillion in loans, a figure the agencies describe as “nearly $1.7 trillion.” (fsapartners.ed.gov) The Education Department’s internal reports show approximately 7.7 million ED‑held borrowers were in default with about $180 billion outstanding as of December 2025, a group Treasury will begin managing first under the agreement. (fsapartners.ed.gov) The Biden‑era SAVE income‑driven repayment plan was terminated by the U.S. Court of Appeals for the Eighth Circuit in early March 2026, a ruling the court issued on March 9 that effectively ends SAVE enrollment for roughly seven million current enrollees. (thecollegeinvestor.com) Federal law permits Administrative Wage Garnishment — a non‑court collection tool that can withhold up to 15% of a borrower’s disposable pay — and the Treasury’s cross‑servicing guidance cites 31 U.S.C. § 3720D and 31 C.F.R. § 285.11 as the legal basis. (fiscal.treasury.gov) The Education Department began sending initial AWG notices to a small group of defaulted borrowers in early January 2026 as it rebuilt collection activity, a rollout the agency said would expand in stages. (cnbc.com) Officials say borrowers in active repayment will not need to change servicers or payment processes immediately while Treasury assumes default collections first, but the agencies have said later phases could extend Treasury’s role to non‑default servicing and FAFSA administration “to the extent practicable and permitted by law.” (ed.gov)