The U.S. Education Department recently announced that wage garnishment for student loan borrowers in default will restart in early 2026. This follows a long pause initiated during the pandemic.
Wage garnishment happens when borrowers haven’t made payments for over 270 days. Once in default, the government can seize tax refunds, Social Security benefits, and deduct up to 15% of a borrower’s earnings.
Starting January 7, the Education Department will send out notices to about 1,000 borrowers, with more reminders following each month. A 30-day warning will precede any garnishment.
Betsy Mayotte, president of The Institute of Student Loan Advisors, highlighted that the timing of this announcement is unfortunate for many. It aligns with an expected rise in health care costs due to premium increases from the Affordable Care Act, likely adding financial pressure on many borrowers.
Statistics reveal that approximately 5.5 million borrowers are currently in default. In addition, around 3.7 million are more than 270 days late on payments, and 2.7 million are early in the delinquency stage. In total, about 12 million borrowers are either delinquent or in default, translating to over 25% of federal student loan borrowers.
Recent conversations on social media indicate worry among borrowers. Many are anxious about how these changes will affect their finances. Expert Preston Cooper from the American Enterprise Institute notes the critical situation of millions struggling with their student debts, putting them at greater risk for economic hardship.
This move marks a significant shift as the government aims to recoup lost funds from defaulted loans, placing additional stress on borrowers who are already feeling the pinch from rising costs elsewhere.
For more information on managing student loan default, you can visit StudentAid.gov.
