Trump team ready to fine Americans who default on their student loan payments: report

The Trump administration is considering fining Americans who are late with their student loan repayments, according to a report.The Washington Sun reports the policy could even see the Treasury hire private debt collectors to help reclaim the money from former students who are behind on their obligations. But the move could ultimately compound former students’ debt problems, if they were already struggling to pay off their loans amid soaring living costs. Should the administration ultimately decide to implement such a potentially divisive strategy, it is not expected to be announced before next month’s midterms elections, the outlet adds.“It’s definitely something they’re thinking about,” a source told the Sun. “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.”The Independent has reached out to the Treasury, the Department of Education and the White House Office of Management and Budget for comment.Treasury Secretary Scott Bessent’s department is reportedly weighing up more aggressive means of reclaiming student loan repayments from defaulting borrowers (Getty)How best to manage the U.S. government’s $1.7 trillion student loan portfolio and its 10 million defaulting borrowers has been a matter of some dispute internally between different federal agencies, according to the Sun.The Treasury reportedly moved last year to oppose a plan by the DOE and the OMB to seize federal benefits and wages from defaulting borrowers, arguing that doing so would amount to penalizing working people.Treasury officials preferred instead to take a softer approach, unveiling a new online portal to make it easier for students to keep track of what they owe and pay back their outstanding debt voluntarily. They also warned that any steps to claw back money owed could have a major impact on people who voted for President Donald Trump and who may currently be struggling to hang onto their jobs.By contrast, Trump’s predecessor Joe Biden tackled the problem by simply waiving an estimated $183.6 billion in student loans during his presidency in order to give young people a better chance of making a life for themselves unburdened by debt.President Joe Biden forgave over $180 billion in student loans during his single-term presidency in order to give Americans a better chance of making a life for themselves unburdened by debt (Getty)Think-tanks like the Committee for a Responsible Federal Budget have meanwhile kept up the pressure on the administration to balance the books, claiming that a postponement of collections last year cost taxpayers an estimated $5 billion.“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,” the group’s senior vice president Marc Goldwein said. “It doesn’t create a sustainable student loan program.”Offering the counter-argument, Michael Pierce, executive director of the advocacy group Protect Borrowers, added: “Restarting debt collection the moment any political accountability has passed just shows how little interest Trump has in helping working families stay afloat.“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.”Student debt expert Preston Cooper of the American Enterprise Institute added: “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. “Somewhere between treating them all as deadbeats and forgiving all the loans is probably the right solution.”