{"database": "openregs", "table": "crs_reports", "rows": [["R48962", "Transition of Servicing Defaulted Federal Student Loans to the Department of the Treasury: Background and Observations", "2026-05-29T04:00:00Z", "2026-05-30T05:24:33Z", "Active", "Reports", "Alexandra Hegji", null, "As of December 31, 2025, the Department of Education\u2019s (ED\u2019s) portfolio of defaulted federal student loans comprises loans of about 7.8 million borrowers (about 18% of all federal student loan borrowers) owing $179 billion. To collect on defaulted federal student loans, the federal government may negotiate a repayment agreement with borrowers, report the loan default to consumer reporting agencies, initiate administrative wage garnishment (AWG) against borrowers, offset borrowers\u2019 federal payments through the Treasury Offset Program (TOP), and/or refer a borrower\u2019s case to the U.S. Department of Justice for civil litigation, among other actions. Borrowers may resolve the default through mechanisms such as payment in full, loan rehabilitation, and loan consolidation. \nED\u2019s Office of Federal Student Aid (FSA) is the primary entity that administers the Higher Education Act (HEA) Title IV federal student loan programs. Prior to policies implemented by ED in response to and following the COVID-19 pandemic (e.g., a pause in most debt collection activities), FSA and its contracted private collection agencies (PCAs) serviced defaulted student loans by using the above-described tools and assisting borrowers to resolve their loan default. FSA and its contractors significantly decreased their debt collection activities because of the COVID-19-related policies. Additionally, in the midst of the COVID-19-related collection pause, FSA cancelled its contracts with PCAs but did not transition servicing of defaulted student loan debt to a new set of contractors as planned. \nThe Department of the Treasury\u2019s (Treasury\u2019s) Bureau of the Fiscal Service (Fiscal Service) provides centralized delinquent debt collection via its Cross-Servicing Program (CSP) for most other federal agencies. Fiscal Service and its contractors attempt to collect on many types of federal delinquent nontax debts and use similar tools as those FSA might use to collect on defaulted federal student loans.\nOn March 19, 2026, ED and Treasury entered into an interagency agreement (Treasury-ED IAA) \u201cto promote innovation and process improvements in pursuit of more effective federal student aid administration.\u201d The IAA contemplates a three-phase approach to pursuing this objective. In Phase 1, Treasury is to assume responsibility for servicing ED\u2019s defaulted federally held student loans through Fiscal Service\u2019s CSP gradually, and FSA is to pay Fiscal Service fees relating to the cost of its services. (The other two phases are not addressed herein.)\nAs part of their rationale for entering into the IAA, ED and Treasury have stated that ED is \u201cill-equipped\u201d to manage the student loan portfolio, whereas, in their view, Treasury has expertise in \u201cmanaging highly complex financial and information technology systems\u201d and in collecting on delinquent and defaulted debts for other federal agencies. Opponents of the effort argue that Treasury \u201clacks expertise in the highly unique and complex federal student loan system\u201d and that Fiscal Service may not be adequately resourced for the transition.\nAvailable data indicate that should all ED-held student loans that are 180 days delinquent (the length of delinquency typically required for other federal agencies to refer loans to the CSP) be referred to the CSP, Fiscal Service may see an 85% increase in the number of delinquent debts and an almost 400% increase in the dollar amount of delinquent debts for which it may be responsible for servicing. While these increases are notable, the extent to which they may pose a challenge for Fiscal Service is unclear for several reasons, including that the IAA contemplates a graduated approach to referral of defaulted student loans to Treasury, which may enable Treasury to gradually gain experience in servicing defaulted student loans before increasing the scope of future operations.\nFew evaluations of Treasury\u2019s collection of delinquent debts and the CSP are publicly available. A 2016 interim report for a pilot program between FSA and Fiscal Service, under which Fiscal Service serviced a sample of defaulted federal student loans, showed some indications that it was less successful than FSA-contracted PCAs in resolving or collecting on such debts. Report findings indicate that federal student loans are unlike other debts typically serviced by Fiscal Service and that Fiscal Service\u2019s general collection operations may not have been sufficiently tailored to address those unique products. Although Fiscal Service had planned some operational changes to improve its performance under the pilot program in light of the interim report\u2019s findings, the pilot was ended earlier than planned and any final results from program are unavailable.", null, "https://www.congress.gov/crs_external_products/R/HTML/R48962.html"]], "columns": ["id", "title", "publish_date", "update_date", "status", "content_type", "authors", "topics", "summary", "pdf_url", "html_url"], "primary_keys": ["id"], "primary_key_values": ["R48962"], "units": {}, "query_ms": 4.194420005660504, "source": "Federal Register API & Regulations.gov API", "source_url": "https://www.federalregister.gov/developers/api/v1", "license": "Public Domain (U.S. Government data)", "license_url": "https://www.regulations.gov/faq"}