The U.S. Education Department has announced plans to restart wage garnishment for student loan defaulters by early 2026, ending a lengthy suspension triggered by the pandemic. This decision will affect numerous borrowers who have not been making payments.
The department estimates that the initial garnishment notices will reach about 1,000 borrowers beginning the week of January 7, with the number of notices expected to grow throughout the year. Borrowers are typically classified as in default if they have not made a payment for over 270 days. In such cases, the federal government may collect on debts by intercepting tax refunds, seizing Social Security benefits, or mandating employers to withhold up to 15% of wages. Borrowers will receive a 30-day notice before garnishment actions commence.
Betsy Mayotte, president of The Institute of Student Loan Advisors, expressed concerns about the timing, noting it coincides with anticipated hikes in health care costs for many affected borrowers. She highlighted, “It will coincide with the increase in health care costs for many of these defaulted borrowers,” referring to the premium increases for Affordable Care Act health insurance in 2026. “The two will almost certainly put significant economic strain on low and middle income borrowers.”
Currently, approximately 5.5 million borrowers are in default, as noted in a recent analysis by the American Enterprise Institute (AEI). An additional 3.7 million borrowers are over 270 days late, with another 2.7 million in the early stages of delinquency. Preston Cooper of AEI stated to NPR, “We’ve got about 12 million borrowers right now who are either delinquent on their loans or in default.” This figure represents more than 25% of all federal student loan borrowers.
Cory Turner contributed to this story.
