Five Million Are Seriously Delinquent On Student Loans, Wage Garnishments Begin

By Mish Shedlock of MishTalk

Monday, January 5, 2026 1:54 PM EST

Education Department to Start Garnishing Pay of Defaulted Student-Loan Borrowers

The Wall Street Journal reports Education Department to Start Garnishing Pay of Defaulted Student-Loan Borrowers

The department said it expects the first notices to be sent to about 1,000 borrowers in default the week of Jan. 7, and that the notices will increase in scale monthly. It said wage garnishment is conducted only after student and parent borrowers have been provided sufficient notice and opportunity to repay their loans.

More than five million federal student loan borrowers are seriously delinquent on their loans and over three million haven’t made a payment in more than 270 days, according to Education Department data. Wage garnishment typically begins after borrowers have missed payments for 270 days.

Until past due payments are paid in full or the default status is resolved, borrowers could see up to 15% of their wages automatically deducted from their paychecks.

What Student Borrowers Need to Know

If you are a student loan borrower, here’s Everything You Need to Know About Wage Garnishment

The Education Department said that it expects the first wave of wage garnishment notices to be sent this week and that notices will increase in scale monthly. It is the latest step by the Trump administration to get federal student-loan borrowers back into repayment after an extended forbearance period that started in the pandemic.

How the government collects

Once student-loan borrowers go into default, their entire loan balance becomes due and the federal government has several ways it can collect the debt.

Defaulted borrowers who haven’t made a payment in more than 360 days or taken action to resolve their status could see up to 15% of their wages automatically deducted from their paychecks. In addition, the government can withhold money from borrowers’ tax refunds and other federal benefits, said Sarah Sattelmeyer, who works in the higher education initiative at New America, a liberal-leaning think tank.

“If you have $10,000 of debt and your federal tax refund is $3,000, the government can withhold that whole amount,” Sattelmeyer said. That is even while it is garnishing the borrower’s pay.

After being notified of the severe collection consequences they could face, borrowers have 30 days to remedy their status and avoid wage garnishment.

Getting out of default status

Borrowers in default have a couple different options. Those who want to object to wage garnishment, whether it is on grounds of an error on their account or their financial or employment status, can request a hearing from the Education Department.

Defaulted borrowers can also choose to negotiate the terms of their debt. One option for doing so might be to consolidate their loans, which replaces the defaulted loans with a new one. This is typically the fastest solution for those who still need to borrow, since borrowers can’t take on additional loans if they are in default, said Carli Reddy, a certified student-loan professional and head of coaching at Candidly, a financial-wellness company. But consolidation can reset the number of payments borrowers have to make before having their remaining balances forgiven under various programs.

Staying in good standing

To avoid falling behind on payments, borrowers should ensure they are on a manageable payment plan. The Education Department uses borrowers’ most recent tax return when determining how much they can afford to pay on an income-driven repayment plan. So borrowers who expect to earn more in the year ahead might want to consider applying for a plan before filing their 2025 tax return, Reddy said.

Those who have recently been laid off or are making less than in the past can submit recent pay stubs to potentially qualify for plans that lower their monthly payments.