HEAL Loan Collections: How the Government Enforces Defaulted Loans

HEAL loans follow stricter rules than most other types of student debt. If you default, the government has unique collection powers that don’t expire — there’s no statute of limitations, so the debt can be enforced indefinitely. For health care professionals, the consequences can extend beyond credit or wages, since Medicare and Medicaid reimbursements may be withheld.

The good news: you still have options to address a default, from consolidation to other resolution strategies. This guide explains how collections work and what steps you can take next.

HEAL loans move into default differently than today’s federal student loans. The process typically unfolds in two stages:

Step 1: Private lender stage

When you first borrowed, the loan came from a bank, credit union, or sometimes your school. If you stopped paying, the lender had to follow federal rules: send written notices, call you, and report the delinquency to credit bureaus.

For larger balances, lenders also had to sue in court and obtain a judgment before the federal government would take responsibility for the loan.

Step 2: Transfer to the Department of Education

Once the lender filed a claim, the federal government reimbursed the lender and took ownership of the loan. Today, the Department of Education (ED) manages these accounts through its Default Resolution Group.

In long-running or complex cases, ED may refer the account to the Department of Justice (DOJ), which can file lawsuits and enforce judgments.

In many instances, HEAL loans were already reduced to court judgments before ED assumed control. That means collection often begins from a stronger legal position than with other federal student loans.

Once your HEAL loan is in the government’s hands, federal law gives the Department of Education and Department of Justice broad collection powers. These tools are similar to those used for other federal student loans, but with a few important differences:

• No statute of limitations. HEAL loans do not expire. The Department of Justice can file a lawsuit to collect the debt even decades after default.

• Administrative wage garnishment. ED can withhold up to 15% of your disposable pay without going to court, the same process used for other federal student loans.

• Federal Treasury offset. Tax refunds, Social Security benefits, and other federal payments can be intercepted and applied to your HEAL balance.

• Medicare and Medicaid offsets (unique to HEAL). If you’re a health professional, reimbursements from Medicare or Medicaid can be withheld until the loan is repaid. In serious cases, failure to pay may result in exclusion from Medicare.

• Judgment enforcement. Because many HEAL loans were reduced to court judgments before ED assumed control, the government can use liens or property seizures to collect.

• Professional consequences. In the past, HHS published lists of defaulted borrowers, and licensing boards or hospitals could be notified. While less common today, these risks have not disappeared entirely.

Borrowers still have important legal protections, even when the government is collecting on a defaulted HEAL loan:

• Fair Debt Collection Practices Act (FDCPA). Collectors cannot harass you. They may not call before 8 a.m. or after 9 p.m., threaten you, or contact you at work if you request they stop. They must also provide written notice of the debt and explain your right to dispute it.

• Right to validation. Within five days of first contact, collectors must send details about the debt. You can dispute the information if you believe it is incorrect.

• Due process in garnishment and offsets. Before wages are garnished or tax refunds are taken, the government must give notice and provide an opportunity to contest the action.

• Legal representation. If you have an attorney, all communication must go through your lawyer.

These rights don’t cancel the debt, but they do regulate how collectors can act and give you a process to challenge errors or abuse.

Defaulted HEAL loans don’t go away on their own, but you do have options. The most common path is consolidation, though settlement or other arrangements may be available in some cases.

Each approach comes with trade-offs. To learn more, see:

• Defaulted HEAL Loans: Options to Get Out of Default

• Can You File Bankruptcy on a HEAL Loan?

• Can You Settle a HEAL Loan?

This article explained how collections work. The next step is to review your options and choose the strategy that fits your situation.