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]

The federal government has officially resumed garnishing wages and withholding benefits from student loan borrowers after years of legal limbo. The Trump administration has made several moves to limit repayment options and enforce collections after an extended COVID-era pause. The federal Education Department announced a proposed legal agreement to squash the Saving on a Valuable Education, or SAVE, plan in December 2025, dealing a final blow to the Biden administration's efforts to forgive or reduce the ...

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 - Delinquent federal student loan borrowers are prioritizing student loan payments over other unsecured debts due to the threat of wage garnishment and involuntary collections [1][2] - A TransUnion survey indicates that borrowers are willing to neglect credit card and personal loan payments to ensure student loans, auto loans, and mortgage payments are made [2][3] - The resumption of collections for defaulted student loans is expected to significantly impact borrowers, with potential penalties including up to 15% of disposable wages being garnished [6][5] Borrower Behavior - Most borrowers who miss payments cite affordability issues or prioritizing other bills as reasons for delinquency [3] - The survey of 508 student loan borrowers reveals a shift in payment hierarchy, with student loans now being prioritized over unsecured personal loans and credit cards [2][3] Credit Trends - Delinquency rates on other types of credit, particularly credit cards and personal loans, have increased among Americans behind on federal student loans [4] - The New York Fed reported that credit card balances reached $1.21 trillion in Q2, marking a 5.87% increase from the previous year, indicating broader financial strain [4] Policy Context - The Trump administration's announcement in April to resume collections on defaulted student loans has heightened concerns among borrowers [6] - The Biden administration's previous attempt to cancel a portion of student loans for millions was halted by the Supreme Court, adding to the ongoing challenges faced by borrowers [7]