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]

Core Insights - Millions of federal student loan borrowers are currently in default or delinquent, with numbers expected to rise as payments restart [2][11] - The Department of Education is ending the Saving on a Valuable Education (SAVE) repayment plan, affecting 7.43 million borrowers who will need to transition to another plan [2][5] - The transition process may be slow due to a backlog in applications and reduced staffing at the Department of Education [3][4] Group 1: Borrower Impact - Borrowers transitioning from the SAVE plan may face significantly higher monthly payments, potentially hundreds of dollars more than anticipated [5][8] - Many borrowers have not made payments in over six years, leading to concerns about their ability to adjust to new payment requirements [7][8] - The number of borrowers in default or delinquency is likely to increase as payments resume, exacerbating existing financial struggles [8][11] Group 2: Economic Implications - Defaulting borrowers may have wages garnished, which could reduce their disposable income and negatively impact overall economic growth [4][11] - The increase in delinquency and default rates could lead to long-term economic consequences, including lower federal revenue [4][10] Group 3: Recommendations - Borrowers are advised to explore repayment plan options now and prepare for new monthly payments, as some plans will be phased out by 2028 [12]

Core Insights - The U.S. government is intensifying collection efforts on overdue federal student loan debt, with less than 40% of borrowers current on payments [1][2] - Nearly 43 million borrowers owe over $1.6 trillion in student loans, with 5 million borrowers having not made a payment in over 360 days [1] Group 1: Default and Collection Process - Federal student loans go into default after 270 days of missed payments, at which point the total loan balance becomes due [3] - Loans in default are transferred to the Department of Education's Default Resolution Group or collections agencies, initiating collection efforts including wage garnishment [4] - Wage garnishment is restarting for the first time in five years, with about 1,000 borrowers receiving 30-day garnishment notices this week, increasing monthly [5] Group 2: Consequences of Default - If in default, 15% of a borrower's income can be withheld from paychecks without a court hearing, and federal benefits and tax refunds may also be seized for repayment [5] - Borrowers in default can regain eligibility for benefits such as deferment, forbearance, and loan forgiveness after rehabilitation or consolidation of loans [8] Group 3: Options for Borrowers - Borrowers can avoid garnishment through three main options: loan rehabilitation with nine affordable payments over 10 months, loan consolidation into a new loan with an income-driven repayment plan, or full repayment of the total balance [7] - The One Big Beautiful Bill Act allows borrowers to rehabilitate their loans up to two times, increasing their chances of regaining eligibility for federal student aid [8] Group 4: Changes in Forbearance Plans - The Saving on a Valuable Education (SAVE) forbearance plan is being eliminated, and pending applications are being closed, with borrowers transitioned to new repayment plans [9] - Borrowers are encouraged to use the government's updated free loan repayment calculator to explore feasible repayment options [10]

Core Insights - The Department of Education will begin garnishing wages of defaulted federal student loan borrowers starting January 7, affecting approximately 1,000 borrowers initially [2][9] - The garnishment process is a response to the significant number of borrowers who have defaulted since the end of the COVID-19 payment pause, with 5.2 million borrowers in default as of September 30, 2025 [4][9] Group 1 - The Department of Education has stated that wage garnishments will increase monthly, impacting more borrowers over time [2] - Borrowers who default after not making payments for over 270 days can have up to 15% of their income garnished, with a 30-day period to negotiate repayment terms or request a hearing [3] - The resumption of wage garnishment marks the first time in about five years that defaulted borrowers face such actions, following the COVID-19 pandemic [7] Group 2 - The garnishment of wages is expected to reduce disposable income for borrowers, potentially hindering economic growth and affecting federal revenue [6] - The Department of Education has confirmed that it will not garnish Social Security benefits from defaulted borrowers, continuing the pause on such actions [8] - The initial announcement for resuming collections on defaulted loans was made in May, with the process taking longer than anticipated due to various factors, including a government shutdown [7]

Core Insights - The Department of Education will resume garnishing wages of defaulted borrowers starting in February, affecting over 5 million individuals who have been in default for 270 days or more [1][8] - Borrowers will be notified on January 7 and have 30 days to rectify their situation before wage garnishment begins [2] - Experts emphasize the importance of borrowers taking proactive steps to regain good standing to avoid negative impacts on their credit and financial situation [3] Loan Consolidation - Loan consolidation allows borrowers to combine multiple student loans into a single loan, which can help them exit default [5][8] - To consolidate, borrowers must enroll in an income-driven repayment plan or make three consecutive, voluntary, on-time payments on the defaulted loan [5] - It is important to note that while consolidation brings borrowers out of default, the record of default and late payments will remain on their credit report [6] Loan Rehabilitation - Loan rehabilitation is a longer process but removes the defaulted loan from a borrower's credit report and does not add accrued interest to the balance [7] - To rehabilitate a loan, borrowers must make nine voluntary, reasonable, and affordable monthly payments over ten consecutive months as determined by their loan servicer [9] - This option is crucial for borrowers looking to restore their credit standing without the burden of additional interest [7]

Colleges will be able to limit the amount of federal student loans for specific programs of study. Experts say this will allow colleges to restrict students in majors that typically default on their loans from taking out more loans than they can handle. https://t.co/yt6DjoX1Ro ...

Core Insights - The analysis by TransUnion indicates a significant increase in the percentage of federal student loan borrowers at risk of default, surpassing pre-pandemic levels [1][3] Student Loan Payment Resumption - The U.S. Department of Education suspended federal student loan payments in March 2020 and resumed collections in September 2023, with reporting to credit bureaus starting in October 2024 [2] Delinquency Rates - As of February 2025, 20.5% of federal student loan borrowers with a payment due are 90 days or more past due, compared to 11.5% in February 2020, marking the highest delinquency rate recorded [3][4] Risk Tier Analysis - Among risk tiers, 51% of subprime borrowers were 90+ days past due in February 2025, up from 39% in February 2020, while near prime borrowers increased from 9% to 23% [4][5] Credit Score Impact - Consumers who defaulted since the end of the on-ramp saw an average credit score decline of 63 points, with super prime borrowers experiencing the most significant score drops [5][7] Default Impact by Risk Tier - The average credit score change for borrowers who defaulted in January and February 2025 varied by risk tier, with super prime borrowers losing an average of 175 points, while subprime borrowers lost 42 points [7] Lender Response - Lenders are increasingly incorporating student loan-specific insights into portfolio reviews to identify potentially impacted consumers, reflecting the significant risk posed by defaults among low-risk borrowers [7]