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]