Student Loan Wage Garnishment to Resume in January for Defaulters

 

Student Loan Wage Garnishment to Resume in January as Millions Face Default

The Trump administration will begin garnishing wages from federal student loan borrowers in default starting early January, marking the first major resumption of aggressive debt collection since the Covid-19 pandemic paused enforcement actions.

A spokesperson for the U.S. Department of Education confirmed to CNBC that administrative wage garnishment notices will start going out the week of January 7, initially targeting about 1,000 defaulted borrowers. Officials say the number of affected borrowers will increase steadily in the weeks that follow.

Millions of Borrowers at Risk

More than 5 million Americans are currently in default on their student loans, according to Education Department estimates. That number could rise to nearly 10 million borrowers in the near future as financial pressure mounts from a cooling job market and continued changes to federal repayment programs.

In total, over 42 million Americans carry student loan debt, with outstanding balances exceeding $1.6 trillion, making it one of the largest categories of consumer debt in the United States.

How Wage Garnishment Works

Under federal law, the government has broad authority to collect on defaulted student loans. This includes the power to seize federal tax refunds, garnish wages, and withhold Social Security retirement or disability benefits.

The Education Department can legally take up to 15% of a borrower’s after-tax wages to repay defaulted loans. However, protections are in place to ensure borrowers retain a minimum income. Borrowers must be left with at least 30 times the federal minimum hourly wage per week, which currently equals $217.50, according to higher-education expert Mark Kantrowitz.

Financial Pressure on Borrowers Intensifies

Student loan borrowers are facing growing challenges as job growth slows, inflation strains household budgets, and access to loan relief programs has become increasingly complicated. Many borrowers report confusion over repayment options following recent policy changes and court rulings affecting federal student loan forgiveness plans.

How Borrowers Can Avoid Garnishment

Consumer advocates urge borrowers in default to act quickly. Those at risk of wage garnishment should contact the Education Department’s Default Resolution Group as soon as possible.

Options to stop collections may include:

• Loan rehabilitation, which allows borrowers to restore loans to good standing

• Consolidation into a new federal loan

• Enrollment in an income-driven repayment plan

Taking action before garnishment begins can help borrowers protect their paychecks and regain control of their student loan debt.

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