Published May 05, 2025 at 3:40 PM EDT

Updated May 05, 2025 at 5:35 PM EDT

The Trump administration is reportedly warning colleges and universities that they could lose access to federal student loan funding if they don't take action to improve repayment rates among former students.

The Education Department plans to invoke existing rules that permit the government to cut off federal student loans to institutions where too many graduates have defaulted on their payments, it was announced Monday afternoon.

Why It Matters

Monday marked the resumption of student loan repayments for millions of Americans whose loans had been paused for five years following the start of the COVID-19 pandemic. Former President Joe Biden tried to completely forgive some student loans but could only extend the pause.

What To Know

The federal government will cut off cash flow to colleges that fail to get as many former students as possible to repay what they owe—a tool long available to the White House.

It is estimated that some 10 million people never resumed paying their student loans after the 2020 pause, and a large share are on the brink of default.

The Education Department wrote to colleges Monday, explaining that they had an responsibility to ensure repayments are made, when they are the ones setting the yearly costs and fees for students.

The letter referenced that the department keeps data on the repayment status of loans, as well as a scorecard on how repayments differ depending on the associated school. If it is found that not enough effort is being made to encourage repayments, Pell Grants and federal loans could be withheld.

President Donald Trump and Education Secretary Linda McMahon have already withheld funding from major schools, including Columbia University in New York and the University of Pennsylvania, after failing to meet the expectations of the administration on issues including pro-Palestinian activists and transgender women in sports.

Colleges are not alone. The Education Department has also opened investigations into schools at all levels in recent months, again over the transgender sports issue, as well as the continuation of DEI programs the president ordered to be scrapped.

Some have criticized these actions, seeing universities as somewhat immune to federal government interference, especially on the issue of free speech. The withholding of federal funds to K-12 schools has also been challenged, including by New Jersey's attorney general.

What People Are Saying

U.S. Secretary of Education Linda McMahon, in a press release Monday: "As we begin to help defaulted borrowers back into repayment, we must also fix a broken higher education finance system that has put upward pressure on tuition rates without ensuring that colleges and universities are delivering a high-value degree to students.

"For too long, insufficient transparency and accountability structures have allowed U.S. universities to saddle students with enormous debt loads without paying enough attention to whether their own graduates are truly prepared to succeed in the labor market."

Adem Selita, co-founder of The Debt Relief Company, previously told Newsweek: "The Department of Education is not a creditor you want coming after you. The consequences of not paying student loans back can be quite severe."

What Happens Next

The guidance to colleges was expected to be sent out on Monday. Former students who still owe the government should have received communication from the Office of Federal Student Aid on what options are available to them.

(http://www.autoadmit.com/thread.php?thread_id=5721211&forum_id=2Elisa#48909061)