Federal student loan borrowers in default could have their wages garnished starting in 2026: Here's what to know

The U.S Department of Education will start garnishing the wages of student loan borrowers who are in default next month, the agency confirmed this week.

After a yearslong pause due to the pandemic, a department spokesperson said the agency will send the first notices to about 1,000 defaulted borrowers during the week of Jan. 7. Notices will increase on "a month-to-month basis" afterward, the spokesperson said.

The enforcement comes after the agency announced that it would resume collections of defaulted student loans in May. At the time, the Education Department said more than 42 million borrowers owed more than $1.6 trillion in student debt.

Betsy Mayotte, president and founder of The Institute of Student Loan Advisors, a free student loan advising service, lamented the timing of the garnishments, which she said will coincide with health insurance premium increases that are expected to impact many Americans.

"I’m really concerned about the double economic whammy, especially to lower- and middle-income families," Mayotte said.

A spokesperson for the Education Department said student loan "collections activities are required under the Higher Education Act of 1965 and Debt Collection Improvement Act of 1996." Collection is "conducted only after student and parent borrowers have been provided sufficient notice and opportunity to repay their loans," the spokesperson said.

Here’s what to know about the upcoming garnishments:

Who will be impacted by the wage garnishments?

A federal student loan borrower who has not made a payment in more than 270 days is considered in default, according to the federal student aid website.

An individual is considered in delinquency, or past due, after the first day of missing a payment. A loan servicer can report delinquency to the national credit bureaus if a borrower is delinquent for more than 90 days.

Borrowers can sign in to their federal student aid website account to view their status.

How will the debt be collected?

A loan servicer can order an employer to withhold up to 15% of the defaulted borrower's  disposable income — the amount left over after deductions — to pay for the loan. The garnishment continues until the loan is paid or removed from default.

Borrowers must be given 30 days' notice before their wages can be garnished, according to the federal student aid website.

The government can also withhold money from a borrower's income tax refund and other federal payments, such as Social Security, loan experts said.

What options do I have if my loan is in default?

Borrowers who receive a default notice can request a hearing with the Education Department to either object to the garnishment or request a reduction of the amount taken out from their wages, according to Persis Yu, deputy executive director and managing counsel for the advocacy group Protect Borrowers.

Borrowers can also explore rehabilitation or consolidation options to get out of default.

Fully repaying the defaulted loan is another option, but that may not be practical for many working families, experts noted.

Mayotte said she often recommends that borrowers enter into loan rehabilitation, which allows them to make nine consecutive payments based on their income. Doing so would put the loan back in good standing and remove it from the borrower's credit report. Consolidation efforts may not have a similar impact on credit reports, she noted.

"Even if rehab takes a lot longer, it can have a much more significant benefit to one’s credit report," she said.

For those who are not yet in default, Yu recommends looking into Income-Driven Repayment options.

How many borrowers could be impacted?

Current numbers were not available but the federal Education Department in April said that more than 5 million borrowers had not made a monthly payment in over 360 days, and estimated that almost 10 million borrowers could be in default in the following months. Only 38% of borrowers were current on their student loans as of April, the department said.

"At a time when families across the country are struggling with stagnant wages and an affordability crisis, this administration’s decision to garnish wages from defaulted student loan borrowers is cruel, unnecessary and irresponsible," Yu said in a statement.