Student Loan Update: Wage Garnishment Timeline Revealed by Education Department

The Department of Education is set to begin garnishing the wages of workers whose student loans are in default this summer.

Why It Matters

The move is expected to affect the roughly 5.3 million borrowers who are in default on their federal student loans. Another 4 million borrowers are late in making payments.

It marks an end to a period of leniency that began during the COVID-19 pandemic. Federal student loans have not been referred for collection since March 2020, including those that were in default. The Department of Education pursued broad student loan forgiveness under President Joe Biden, but those efforts were stopped by the courts.

How Does Wage Garnishment Work?

Federal law allows the Department of Education to garnish up to 15 percent of a worker's paycheck without a court order if they go into default on federal student loans.

The department can issue garnishment orders to employers and contracts with private agencies to enforce collection.

When Will Wage Garnishment Happen?

The department said that from May 5, it would begin involuntary collection through the Treasury Department's offset program, which withholds government payments—including tax refunds, federal salaries and other benefits—from people with past-due debts to the government.

About 195,000 defaulted student loan borrowers will receive a 30-day notice from the Treasury Department beginning May 5, notifying them that their federal benefits will be subjected to the program, the department said in a news release. The first monthly benefit checks affected would be those scheduled for early June.

Later this summer, all 5.3 million defaulted borrowers are set to receive a notice from the Treasury that their earnings are subject to wage garnishment.

What People Are Saying

Secretary of Education Linda McMahon said in a statement on Monday: "As we begin to help defaulted borrowers back into repayment, we must also fix a broken higher education finance system that has put upward pressure on tuition rates without ensuring that colleges and universities are delivering a high-value degree to students.

"For too long, insufficient transparency and accountability structures have allowed U.S. universities to saddle students with enormous debt loads without paying enough attention to whether their own graduates are truly prepared to succeed in the labor market."

Mike Pierce, the executive director for the Student Borrower Protection Center, said in a statement on April 21: "For 5 million people in default, federal law gives borrowers a way out of default and the right to make loan payments they can afford. Since February, Donald Trump and Linda McMahon have blocked these borrowers' path out of default and are now feeding them into the maw of the government debt collection machine. This is cruel, unnecessary, and will further fan the flames of economic chaos for working families across this country."

What Happens Next

The Department of Education said all borrowers in default would receive emails from Federal Student Aid informing them of the developments and urging them to contact the department's Draft Resolution Group to make a payment, enroll in an income-driven repayment plan or sign up for loan rehabilitation.