Feds Resume Taking Wages From People Who Stopped Paying Student Loans

Wage Garnishment Returns After Five Years

For nearly five years, Americans who defaulted on their student loans got a break. No collection calls.

No money taken from paychecks. That ended this week.

The Department of Education is now sending garnishment notices to borrowers who stopped paying, and the numbers will grow every month.

If you owe federal student loans and have not made a payment in 270 days or more, here is what is about to happen to your paycheck.

First Notices Went Out January 7

The Department of Education sent wage garnishment notices to about 1,000 defaulted borrowers during the week of January 7, 2026. That number will increase monthly as the agency works through millions of accounts.

This is the first time since March 2020 that borrowers in default have faced this kind of enforcement. The agency says it will only begin collections after borrowers have been given notice and a chance to respond.

Up to 15 Percent of Your Pay

Federal law allows the government to garnish up to 15% of your disposable income without going to court. Disposable income is what remains after taxes and required deductions.

If you earn $1,000 a week after taxes, you could lose $150 per paycheck.

The law also protects low earners by requiring that borrowers keep at least 30 times the federal minimum wage per week, which works out to $217. 50.

5.5 Million Borrowers Already in Default

More than 5. 5 million Americans are currently in default on their federal student loans, owing a combined $140 billion. Default happens after 270 days of missed payments.

These borrowers have not made a payment since before the pandemic pause began, or they fell behind after payments resumed in October 2023 and never caught up.

Millions More Are Close Behind

The 5. 5 million in default are not alone.

Another 3. 7 million borrowers are 270 or more days late and teetering on the edge.

About 2. 7 million more are in earlier stages of delinquency.

Add it up, and roughly 12 million borrowers, about one in four, are behind on their federal student loans right now.

COVID Froze Collections for Years

In March 2020, the government paused student loan payments because of the pandemic. Interest dropped to zero.

Collection calls stopped. Wage garnishment halted.

President Trump started the pause, President Biden extended it multiple times, and Congress finally ended it in mid-2023. Payments officially resumed in October 2023, but many borrowers never started paying again.

The On-Ramp Grace Period Expired

After payments resumed, the Department of Education gave borrowers a 12-month on-ramp.

During that period, late or missed payments would not trigger default, hurt credit scores, or send accounts to collections. That protection ended on September 30, 2024.

Borrowers who missed payments after that date now face the full consequences.

The SAVE Plan Got Killed

The Biden administration created the SAVE plan to offer lower monthly payments and faster forgiveness. More than seven million borrowers signed up.

But Republican states sued, courts blocked it, and in December 2025 the Trump administration settled with Missouri to end the plan entirely.

Borrowers enrolled in SAVE must now switch to other repayment options, many of which cost more.

You Have 30 Days to Act

Once you receive a garnishment notice, you have 30 days to respond. You can request a hearing to dispute the debt or argue financial hardship.

You can also take steps to exit default before garnishment begins.

If you do nothing, your employer will start withholding 15% of your paycheck and sending it to the government.

Rehabilitation Removes the Default

Loan rehabilitation lets you exit default by making nine affordable monthly payments over ten months. The payment amount is based on your income and can be as low as five dollars.

Once you complete rehabilitation, the default is removed from your credit report, though your late payments remain. You can only rehabilitate a loan once.

Consolidation Works Faster

If you need to get out of default quickly, consolidation is the faster route.

You combine your defaulted loans into a new Direct Consolidation Loan and agree to an income-driven repayment plan. The process takes weeks instead of months.

The downside is that the default stays on your credit report for seven years.

Your Tax Refund Is at Risk Too

Wage garnishment is not the only tool the government has.

Through the Treasury Offset Program, the Department of Education can seize your federal tax refund, federal salary, and in some cases Social Security benefits.

The offset program restarted in May 2025, so borrowers in default may already have lost their 2024 tax refunds.

Low-Income Borrowers Hit Hardest

A 15% wage garnishment is painful for anyone, but it hits hardest for people already struggling to pay rent, buy food, and cover childcare.

Many borrowers defaulted not because they refused to pay, but because they did not know about income-driven plans that could have lowered their payments to zero.

If your loans are in default, contact the Default Resolution Group at 1-800-621-3115 or visit the Federal Student Aid website to explore your options before the garnishment starts.

This article was created with AI assistance and human editing.

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