Student Loan Borrowers in Default Face Garnished Wages Again

The Department of Education is set to resume collections on federal student loans for borrowers who are in default, after a five-year hiatus. Borrowers who are at least 270 days behind on their payments face harsh consequences, including wage garnishment and loss of federal benefits. Education Secretary Linda McMahon stated that this move will end the practice of taxpayers serving as collateral for irresponsible student loan policies.

During the COVID-19 pandemic, penalties for late payments were relaxed, but now the Education Department is returning to pre-pandemic rules. Over 5 million borrowers are currently in default, with that number expected to double in the coming months. Advocates for student loan borrowers criticized the decision to restart collections, especially in light of recent layoffs at the Education Department.

The consequences of defaulting on student loans are significant and long-lasting. Defaulting can make borrowers ineligible for federal loan programs, damage their credit score, and result in wage garnishment. To get back on track, borrowers must complete a loan rehabilitation or consolidation program, which can take up to 10 months.

The Education Department is launching a communication campaign to educate borrowers on their options and simplify the repayment process. Borrowers in default will receive emails urging them to take action, with wage garnishment notices to follow later in the summer.

Overall, the resumption of student loan collections signals a return to normalcy in the loan repayment system. Borrowers are encouraged to take proactive steps to address their defaulted loans and avoid further financial consequences.