Some Student Loan Borrowers Could Have Their Wages Garnished

Yahoo

07-05-2025

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Yahoo is using AI to generate takeaways from this article. This means the info may not always match what's in the article. Reporting mistakes helps us improve the experience.
Yahoo is using AI to generate takeaways from this article. This means the info may not always match what's in the article. Reporting mistakes helps us improve the experience. Generate Key Takeaways
The U.S. Department of Education has announced that it is resuming collections of defaulted student loans, starting on May 5.
In an April 21, 2025, news release, the DOE wrote that it "has not collected on defaulted loans since March 2020. Resuming collections protects taxpayers from shouldering the cost of federal student loans that borrowers willingly undertook to finance their postsecondary education."
The DOE added: "This initiative will be paired with a comprehensive communications and outreach campaign to ensure borrowers understand how to return to repayment or get out of default."
According to CNN, federal student loans "go into default after 270 days without payment."
The news release explains how the process will work, and says it could involve garnishing people's wages.
"All borrowers in default will receive email communications from FSA over the next 2 weeks making them aware of these developments and urging them to contact the Default Resolution Group to make a monthly payment, enroll in an income-driven repayment plan, or sign up for loan rehabilitation," the release says.
"Later this summer, FSA will send required notices beginning administrative wage garnishment. The Department will also authorize guaranty agencies that they may begin involuntary collections activities on loans under the Federal Family Education Loan Program," it adds.
A person walks past the U.S. Department of Education on March 20, 2025 in Washington, DC. U.S. President Donald Trump is preparing to sign an executive order to abolish the Department of Education.Administrative wage garnishment allows the government "to order a non-federal employer to withhold a percentage of an employee's income to pay a delinquent debt," CNN explained.
According to CNN, the administration plans to reinstitute a program that allows
"garnishing federal and state payments, such as tax returns or social security benefits."
The DOE wrote that Congress "mandated that student and parent borrowers begin to repay their student loans in October 2023."
'American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,' said U.S. Secretary of Education Linda McMahon in the news release.
She said the executive branch "does not have the constitutional authority to wipe debt away, nor do the loan balances simply disappear."
The Student Borrower Protection Organization, an advocacy group, wrote in a news release that the move was sending student loan borrowers "into the maw of the government debt collection machine.'
The action will "begin subjecting millions of Americans in default to mandatory collections, including wage garnishment, tax refund, and Social Security benefit offsets," the group wrote.
But McMahon painted the move as necessary for borrowers' "financial health and our nation's economic outlook."
"Hundreds of billions have already been transferred to taxpayers," McMahon wrote.
The news release says that "42.7 million borrowers owe more than $1.6 trillion in student debt."
It adds that more than 5 million borrowers "have not made a monthly payment in over 360 days and sit in default—many for more than seven years—and 4 million borrowers are in late-stage delinquency (91-180 days). As a result, there could be almost 10 million borrowers in default in a few months."
That would amount to "almost 25 percent" of student loans, the press release noted, adding that "only 38 percent of borrowers are in repayment and current on their student loans."
The release says that all "FSA collection activities are required under the Higher Education Act and conducted only after student and parent borrowers have been provided sufficient notice and opportunity to repay their loans under the law.
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