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Wage Garnishments Loom for Millions of Student Loan Defaulters
Washington D.C. – Millions of student loan borrowers facing severe payment delinquencies are set to see their paychecks impacted by wage garnishments starting in January. The U.S. Department of Education confirmed this development on Tuesday, marking a significant step in the Trump administration’s ongoing efforts to reform the nation’s vast student loan system.
The move comes as part of a broader overhaul of the nearly $1.7 trillion student loan landscape, which affects over 40 million Americans. Approximately 5 million individuals have defaulted on their student loan payments, meaning they have failed to make payments for at least nine months, or 270 days. Once a loan enters default, it becomes subject to mandatory collection actions.
Collection efforts, which typically involve wage garnishments and the offsetting of tax refunds or other federal benefits like Social Security, recommenced in May. According to the Department of Labor, wage garnishment is a legal process requiring an employer to withhold a portion of an individual’s earnings by court order to satisfy a debt. The Education Department anticipates that the initial wave of wage garnishment notices will be sent to around 1,000 defaulted borrowers during the week of January 7, with the scale of notices increasing in subsequent months.
Officials emphasize that collection actions are only initiated after student and parent borrowers have been given “sufficient notice and opportunity” to repay their loans.
Former Under Secretary of Education James Kvaal previously highlighted the “tragic” consequences of loan defaults for borrowers, warning that such actions can negatively impact credit scores and future eligibility for student aid.
Student debt advocates have voiced strong concerns, noting that these upcoming garnishments will be the first time borrowers have faced paycheck seizures since the onset of the COVID-19 pandemic. Persis Yu, deputy executive director and managing counsel of Protect Borrowers, an advocacy group, criticized the administration’s decision, calling it cruel to Americans already struggling with the “affordability crisis.”
In a statement, Yu asserted, “As millions of borrowers sit on the precipice of default, this Administration is using its self-inflicted limited resources to seize borrowers’ wages instead of defending borrowers’ right to affordable payments.”
Earlier this month, the Education Department moved to terminate the Saving on a Valuable Education (SAVE) plan, one of former President Joe Biden’s popular student loan forgiveness programs, which had enrolled over 7 million borrowers.
Education Secretary Linda McMahon has stated that the Trump administration is focused on simplifying the “overly complex” repayment process and reducing borrowing amounts to “help curb rising tuition costs.” Her department is also exploring the possibility of transferring the student debt portfolio, potentially to the Department of Treasury. McMahon confirmed discussions with Treasury Secretary Scott Bessent regarding this transfer, though no final decisions have been made.
Ellen Keast, the Department of Education’s press secretary for higher education, commented, “We are evaluating ways to improve the fiscal health of the nearly $1.7 trillion student loan portfolio to safeguard the interests of both students and taxpayers.”