WASHINGTON, DC – MARCH 12: The headquarters of the Department of Education are shown March 12, 2025 … More
Getty ImagesBorrowers Brace As Student Loan Wage Garnishment Resumes After 5 Year Freeze
After a five-year hiatus, the federal government has officially restarted student loan wage garnishment and other collection tactics for defaulted federal loans as of May 5. Millions of borrowers who fell into default during the payment pause are now at risk of seeing part of their paychecks seized to repay their debt. This move ends an unprecedented reprieve that began in March 2020, when collections were paused amid the pandemic. Now, with the collections officially switched back on, borrowers and experts are assessing what the return of garnishment means and how to mitigate its impact.
Why Student Loan Wage Garnishment Is Coming Back In 2025
Wage garnishment and other involuntary collection efforts, like tax refund offsets and Social Security benefit reductions, for defaulted federal student loans have been on hold since March 2020. This pause was part of emergency pandemic relief measures, protecting borrowers from having wages seized during economic uncertainty. As of May 5, 2025, that protection is ending. The U.S. Department of Education’s Office of Federal Student Aid has confirmed it will resume collections on defaulted loans starting May 5, starting with the impacting millions of borrowers in default.
The Education Department warned borrowers in late April that the Treasury Offset Program would restart on May 5, which would allow it to withhold payments such as tax refunds and Social Security benefits to cover delinquent debt. The government can again seize federal tax refunds and garnish wages to collect defaulted student debt. Notices for wage garnishment will begin later this summer, after which employers could be instructed to withhold a portion of take-home pay for those who haven’t made payment arrangements. One observer described the return of collections as inevitable: “They were always going to start collecting these defaulted loans again — it was just a matter of when the switch was going to get flipped,” Betsy Mayotte, president of The Institute of Student Loan Advisors told NPR.
Federal Student Aid officials say resuming collections is necessary to enforce the law and recoup taxpayer funds. However, according to Reuters, borrower advocates have condemned the abrupt return to punitive measures
How Student Loan Wage Garnishment Works For Defaulted Student Loans
Student loan wage garnishment is one of the government’s most powerful tools to collect defaulted student debt and notably doesn’t require a court order. By law, the Education Department can direct employers to withhold up to 15% of a borrower’s disposable pay to repay defaulted loans. For example, if a borrower takes home $500 a week, about $75 could be taken out of each paycheck and applied toward the student loan debt. This automatic deduction process is called administrative wage garnishment.
Alongside garnishing wages, the government has other aggressive collection methods back at its disposal. It can intercept federal tax refunds (through the Treasury Offset Program) and even reduce Social Security benefits for seniors who defaulted on student loans. Unlike a typical debt collection, these actions happen without a lawsuit; the government can enforce repayment once a loan defaults.
Before garnishment begins, borrowers in default will receive an official notice and have a window to respond. Federal law requires loan holders to send a 30-day advance notice before initiating wage garnishment. That notice allows the borrower to appeal or make arrangements to avoid the paycheck hit. As previously reported, the garnishment notice sets a response deadline of 30 days from the date of the letter forbes.com. To stop garnishment, the borrower must enter a repayment agreement or successfully challenge the action by that deadline. If no action is taken, after 30 days, the loan holder can instruct the employer to start withholding 15% of wages. In practice, borrowers could start seeing smaller paychecks as soon as mid-to-late summer 2025.
Who Is Most At Risk From Student Loan Wage Garnishment?
A new study by the Federal Reserve Bank of New York now estimates that close to 10 million student loan borrowers became past due on their student loan bills after the pandemic payment pause ended. These borrowers represent some of the most vulnerable student loan holders. A 2019 study by The Institute for College Access & Success found that 65% of borrowers who defaulted had incomes below 200% of the federal poverty line. In other words, a large majority of people facing default were already low-income, and having up to 15% of their pay garnished can be financially devastating.
Demographically, women are likely to bear the brunt of the resumed collections. Women hold roughly two-thirds of all student loan debt, and research suggests they are slightly more likely than men to have experienced default on a student loan. Women also, on average, earn less than men, which makes any reduction in take-home pay due to garnishment especially punishing. In a previous Forbes post, I noted that women, particularly women of color, could be hit hardest by the return of student loan wage garnishment. This is because the gender pay gap and other economic disparities leave women borrowers with less cushion to absorb a sudden cut in net income.
Borrower advocacy groups have sharply criticized the decision to restart collections at this time, pointing to the economic pressures many Americans still face. “The announcement comes as Americans are navigating unprecedented economic uncertainty,” noted the Student Borrower Protection Center in Reuters, highlighting rising costs in other areas of life. In short, the resumption of garnishment will hit a financially fragile population, those struggling even before losing a chunk of their pay to student loans.
What Borrowers Can Do to Avoid Student Loan Wage Garnishment
The return of student loan wage garnishment is a wake-up call for anyone with a federal student loan in default. Ignoring the problem will worsen, but options exist to get out of default and avoid having 15% of your pay taken. As I emphasized in earlier Forbes posts, those who don’t take action are the ones who will feel the pain. Taking action, whether by entering a repayment plan or rehabilitating your loans, can protect your paycheck and put you back on the path to good standing. With the proper steps, borrowers can mitigate the impact of this policy change, even as the era of extraordinary federal leniency ends.
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