Student Loan Collections, Including Wage Garnishment, Will Resume for Millions in Default

For the first time since 2020, federal student loan collections will start up again next month. The U.S. Department of Education has confirmed that it will start withholding tax refunds and garnishing salaries from borrowers who are in default.

Education Secretary Linda McMahon announced on Monday that a pandemic-era block that protected millions of borrowers from debt collection efforts is ending. The agency and the Treasury agency will resume their collaboration on collecting past-due student debt using involuntary methods, including as wage garnishment and the federal offset program, on May 5.

Currently, there are over 5.3 million borrowers who have fallen behind on their federal student loans. Four million more people are deemed vulnerable as their accounts are past due by more than ninety days. Less than 40% of all borrowers are current on their debts, according to department data.

“Irresponsible student loan policies will no longer require American taxpayers to act as collateral,” McMahon said in a statement. “It’s time to put the program back in a financially responsible position.”

A borrower is said to be in default if they miss payments for nine months in a row. Loans that are in default may be sent to collections, which would have a bad effect on the credit records of the borrowers. The government can collect on overdue debt by intercepting federal salaries, tax refunds, and other payments through the Treasury offset program.

Before wage garnishment starts, borrowers will be given 30 days’ warning.

Under then-President Donald Trump, student loan interest and payments were first suspended in March 2020 as a short-term COVID-19 relief measure. Both the Trump and Biden administrations repeatedly prolonged the hiatus. Tens of millions of borrowers returned to active payments when a final grace period ended in October 2024.

The U.S. Supreme Court halted President Joe Biden’s larger debt cancellation plan, but his administration has nevertheless authorized more than $183 billion in targeted student loan forgiveness through expanding programs. Loan cancellations, either in full or in part, have affected almost 5 million borrowers.

McMahon, however, claimed that the previous administration’s actions were excessive.

“The Department of Education and the Department of Treasury will continue to responsibly and legally oversee the student loan program,” she stated.

In order to prevent garnishment or other penalties, borrowers who are currently in default may choose to look into possibilities for loan rehabilitation or enroll in income-driven repayment plans. The government is anticipated to release additional details prior to the enforcement date of May 5.