The Trump administration has proposed garnishing the wages of those in default on their student loans next year, meaning the government would take a portion of their wages to pay off the loan.
The U.S. Department of Education confirmed on Tuesday that the garnishing of wages will start on January 7 when it sends notices to roughly 1,000 borrowers who defaulted on their student loans. Such collection activity has been on hiatus since the coronavirus pandemic of 2020, per CNBC. For outstanding federal debts, the United States government has the power to seize federal tax refunds, wages, and even social security and disability benefits.
CNBC noted:
The Education Department can seize up to 15% of a student loan holder’s after-tax income to put toward their debt. By law, borrowers must be left with at least 30 times the federal minimum hourly wage ($7.25) a week, which is $217.50, said higher education expert Mark Kantrowitz.
Outstanding student loan debt now exceeds $1.6 trillion held by more than 42 million Americans.
According to ABC News, roughly “5 million Americans have defaulted on student loan payments, which means they haven’t paid their debts for at least nine months or 270 days. When the loan officially enters default, it becomes eligible for mandatory collections. ”
Persis Yu, deputy executive director and managing counsel of advocacy group Protect Borrowers, called the administration’s order cruel due to the “affordability crisis.”
“As millions of borrowers sit on the precipice of default, this Administration is using its self-inflicted limited resources to seize borrowers’ wages instead of defending borrowers’ right to affordable payments,” Yu wrote in a statement.
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