If you’re planning to buy a home or refinance in 2025—and you have student loan debt—there’s a major update you need to know about.

Starting May 5th, 2025, the U.S. Department of Education is resuming collections on defaulted federal student loans. This change could negatively impact your credit, your mortgage approval, and your long-term homeownership goals.

Here’s what’s happening, why it matters, and what you can do right now to protect your credit and your future.

What’s Changing: Student Loan Collections Resume

As of May 5th, borrowers who have defaulted on their federal student loans and have not taken action will face collections activity. This includes those who have not:

• Made a payment on their delinquent student loans
• Enrolled in an income-driven repayment plan (IDR)
• Started a rehabilitation program

Who Does This Affect?

It’s estimated that 15% of student loan borrowers will be impacted—potentially seeing:

• Collections added to their credit reports
• A drop in credit scores
• Ineligibility for a mortgage without entering a 3+ month rehab program

Wage Garnishments Coming This Summer

The Trump administration has also stated that wage garnishments may begin later this summer for those who fail to act. Borrowers will receive advanced warning, but if they don’t enroll in a repayment program or rehab plan, their paychecks or Social Security benefits may be garnished.

This doesn’t just affect finances—it can raise debt-to-income (DTI) ratios and significantly reduce your buying power as a borrower.

No More Mass Loan Forgiveness

The Department of Education has clearly stated:

“Student and parent borrowers—not taxpayers—must repay their student loans.”

Translation? There will not be any mass student loan forgiveness in 2025. The focus now is on getting borrowers back into repayment.

That said, the Department is working on an enhanced Income-Driven Repayment (IDR) process to simplify the enrollment experience and reduce the burden on borrowers.

What Borrowers Are Receiving

Since this announcement on April 21st, borrowers have started receiving emails from the Dept. of Treasury’s Offset Program. These notices:

• Confirm loan default
• Warn of pending collections
• Include a link to the Debt Resolution portal to take action

Many borrowers may miss these notices due to outdated contact information, so it’s crucial to:
✅ Log in and update your details
✅ Enroll in a repayment or rehab plan ASAP
✅ Share this info with anyone you know carrying student loan debt

What Should Homebuyers and Realtors Do?

Whether you're a realtor working with buyers, a borrower planning to purchase, or someone just trying to figure it all out—we’re here to help.

Our team can:

• ✅ Help clients check their credit and loan readiness
• ✅ Recommend steps to address student loan issues
• ✅ Partner with special tools to ensure borrowers are on track to qualify

This is a time to be proactive, not reactive.

Q&A: Student Loans & Mortgage Readiness in 2025

Q: Will a student loan in default disqualify me from buying a home?
A: Possibly. If your loan is in default and reported to collections, your credit score can drop, and you may not be eligible for approval without first entering a rehabilitation program—which takes at least 90 days.

Q: What’s the fastest way to resolve my student loan issue?
A: Log into myeddebt.ed.gov and check your status. From there, you can enroll in a repayment plan or request rehab. If you're unsure, reach out to our team—we’ll walk you through the process.

Q: I haven’t received any notices—should I still be concerned?
A: Yes! Many borrowers have outdated info with their loan servicers. Take 5 minutes to check and update your contact info immediately.

Q: Can your team still help me get prequalified if I have student loans?
A: Yes, as long as your loans are not in default or you’re actively working through a repayment or rehab plan. We’ll evaluate your full credit picture and build a strategy together.

Final Thoughts: Don’t Let This Derail Your Homeownership Goals

We know it’s overwhelming. Between the policy changes, repayment plan options, and credit implications—it’s easy to feel lost.

That’s why we’re here.

📲 If you’re unsure where you stand, schedule a free consultation with The Sherry Riano Team today. We’ll help you make sense of the chaos and put you back on track to buy, refinance, or invest with confidence.

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