What's Happening?
The Trump Administration is set to restart wage garnishment for student loan borrowers who are in default, a policy that was paused during the COVID-19 pandemic. Beginning the week of January 7, 2026,
the federal government will send out an initial batch of about 1,000 notices to individuals with defaulted student loans, with more notices to follow monthly. Under federal law, the government can seize up to 15% of a borrower's disposable pay without a court order. This includes various forms of income such as salary, overtime, and bonuses. The protection for low-wage workers is limited, as federal rules only shield the first $217.50 per week, which is below many state minimum wages. Borrowers are supposed to receive a 30-day notice to respond before garnishment begins, but many do not receive this due to outdated contact information. Options to avoid garnishment include loan rehabilitation or consolidation, but these are not available to all borrowers.
Why It's Important?
The resumption of wage garnishment could significantly impact millions of student loan borrowers, particularly those earning near the poverty line. The policy allows the government to bypass the courts, making it easier to collect debts but potentially leaving borrowers with less disposable income. This move comes after the Trump Administration rolled back parts of the Biden-era SAVE Plan, which had provided more accessible repayment options for borrowers in default. The changes could lead to increased financial hardship for those unable to meet the new requirements, as they may face automatic deductions from their paychecks. The policy shift underscores the ongoing debate over student loan forgiveness and the federal government's role in managing student debt.
What's Next?
As wage garnishment resumes, borrowers in default are advised to update their contact information and respond promptly to any notices to avoid automatic deductions. The Trump Administration's decision to eliminate the SAVE Plan's provisions means that borrowers must exit default before accessing income-driven repayment plans. This could lead to increased pressure on borrowers to rehabilitate or consolidate their loans, though these options are limited. The policy's implementation may prompt reactions from advocacy groups and policymakers who support more lenient repayment terms. The broader implications for student loan policy and borrower protections remain to be seen as the administration continues to navigate the complex landscape of student debt management.
