The news: The government has resumed student loan collections for the over 5 million borrowers currently in default, the US Department of Education announced. The administration will also begin wage garnishment later this summer for borrowers who fail to make their repayments.

By the numbers: Student loan defaults could reduce consumer spending by up to $63 billion a year, according to a Bloomberg Economics estimate—yet another headwind for a US economy already weighed down by the effects of tariffs and economic uncertainty.

• Just 38% of the 42.7 million people with federal student loans are actively repaying and current on their debts, according to the Education Department.
• With roughly 4 million people in late-stage delinquency, the number of people in default—and therefore eligible for wage garnishment—could nearly double over the next few months.
• That includes around 452,000 borrowers ages 62 and older, who face the prospect of reduced government benefits—including smaller Social Security checks—which could strain already limited budgets.

Our take: The move to restart student loan repayments couldn’t come at a worse time for consumers, who are already extremely anxious about their finances as they brace for tariff-induced inflation and grow more worried about their employment prospects.

As with many other actions taken by the Trump administration, the student loan collections process comes with uncertainty. Around 8 million people are stuck in forced forbearance due to legal challenges to their repayment plans, while the Education Department’s cuts under DOGE have made it difficult for borrowers to find the information they need to get back on track.

The crackdown—following over five years of leniency—threatens to further erode consumer confidence and buying power at an extremely fragile moment.

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