Student Loan Defaults, Equity Policy Shifts, and Higher Ed Compliance Changes

This week’s most significant headline out of the U.S. Department of Education is the department’s strong reminder to colleges and universities: help student loan borrowers who are struggling to get back on track. Following the May 5 restart of collections on defaulted federal student loans—paused since the pandemic began in 2020—the Department issued new guidance for higher education institutions, urging them to ensure borrowers are fully informed about their repayment options and responsibilities. With approximately 5 million borrowers already in default and another 4 million dangerously close, the stakes are high, as up to 10 million Americans could soon see serious consequences like tax refund offsets or wage garnishment through the Treasury Offset Program now back in operation. Secretary of Education Linda McMahon emphasized, “This is a moment for shared responsibility—between the government, student borrowers, and colleges—to help Americans avoid the worst outcomes of loan default while upholding accountability.” Notices about wage garnishment are expected as soon as this summer, and financial aid officers across the country are ramping up outreach to vulnerable alumni. In parallel, major federal policy shifts have come down the pipeline. The Department is enforcing an order to eliminate all race-based practices—including in financial aid and hiring—by February 28. This radical change is forcing institutions to rethink not just admissions but all aspects of campus support and diversity programs. Meanwhile, federal agencies have been directed to drastically cut DEI-related grants, potentially pulling the rug out from under programs supporting underrepresented students, faculty development, and academic belonging initiatives. While some states push back by doubling down on their own equity investments, colleges everywhere are scrambling to adapt—focusing now on using economic status or ZIP code as proxies for support while maintaining compliance. Budget debates continue as Congress works toward finalizing FY 2025 Education appropriations. The Department is also updating resources, like the 2025–26 Federal School Code list, to help families navigate the FAFSA and ensure their aid reaches the right schools. On another front, the Department has opened a foreign funding investigation into the University of Pennsylvania, signaling toughened oversight amid broader concerns about transparency and accountability in higher education. For American citizens, these developments mean renewed pressure on student loan borrowers, shifting campus climates as equity policies are redefined, and potential challenges in accessing support resources. Businesses—especially ed-tech and student loan servicers—face new compliance requirements, while state and local governments may have to fill gaps as federal roles change. Internationally, increased scrutiny of foreign funding could impact global partnerships and research collaborations. Looking ahead, watch for f This content was created in partnership and with the help of Artificial Intelligence AI.