Student loan borrowers in default face garnished wages, Education Department says
The Education Department is gearing up to start collecting payments for student loans in default, including through wage garnishment for potentially millions of borrowers. This announcement comes as more than 5 million borrowers are currently in default, with an additional 4 million at risk of falling into the same predicament in the coming months. This could mean that nearly a quarter of the federal student loan portfolio may soon be in default, highlighting the magnitude of the issue at hand.
Starting on May 5, the Education Department will initiate involuntary collections through the Treasury Department’s offset program, which recovers delinquent debts by withholding payments such as tax refunds, federal salaries, and Social Security benefits. This move aims to prompt borrowers in default to explore repayment options and take necessary steps to address their outstanding student loan debt.
In response to the looming crisis, the Education Department plans to send out emails to those in default within the next two weeks, outlining the next steps and encouraging them to consider their repayment options. Subsequently, wage garnishment notices will be dispatched later this summer to further enforce the repayment process.
It’s worth noting that no federal student loan has been referred to collections since March 2020 when President Trump implemented a pause on payments and interest accrual during the COVID-19 pandemic. While the Biden administration extended this pause until October 2024, efforts to wipe out student loan debt for millions of borrowers were thwarted by legal challenges, including a Supreme Court ruling in 2023.
Education Secretary Linda McMahon emphasized the importance of borrowers returning to repayment to safeguard their financial well-being and contribute to the nation’s economic stability. She also clarified that there will not be any mass loan forgiveness moving forward, underscoring the need for responsible management of the student loan program in accordance with the law.
As the Education Department takes proactive measures to address the student loan debt crisis, borrowers are urged to stay informed about their repayment options and take necessary steps to avoid default. The Biden administration’s commitment to upholding the integrity of the student loan program signals a shift towards accountability and financial responsibility for all stakeholders involved.
