Wage garnishing is back for federal student loan defaults: What to do

Core Insights - The Trump administration is resuming involuntary collections for federal student loan borrowers in default, which could lead to wage garnishment starting this month [1] - An estimated 5.5 million borrowers are currently in default, with an additional 6 million at high risk of default due to delinquency [2] - The Biden administration's SAVE repayment plan, which aimed to assist nearly 7 million borrowers, faced legal challenges and was ultimately terminated, potentially increasing default rates [3][4] Group 1: Default and Collections - Wage garnishment can deduct up to 15% of a borrower's disposable after-tax pay and applies only to those in default, defined as being 270 days or more behind on payments [1] - The Education Department has a legal obligation to collect on outstanding federal debts, and wage garnishment is a method to fulfill this responsibility [5] Group 2: Impact of SAVE Plan - The SAVE plan, which placed loans in administrative forbearance, was intended to help borrowers but faced legal challenges that led to its cancellation [3][4] - Borrowers affected by the termination of the SAVE plan will likely have to switch to other federal repayment plans with higher monthly payments, increasing the risk of defaults [4] Group 3: Wage Garnishment Process - Before wage garnishment begins, defaulted loans must be transferred to the Education Department's Default Resolution Group, and borrowers will receive a notice of intent to garnish wages [6] - When wages are garnished, borrowers must be left with a minimum of $217.50 per week, which is 30 times the federal minimum wage, to comply with the 15% limit on disposable pay [7]