Department of Education to Garnish Wages for Student Loan Repayment

With the onset of the pandemic, the federal government paused payments on federal student loans. In 2023, the Biden administration transition back to making payments but gave borrowers a 12-month “on-ramp” period during which late or missed payments wouldn’t hurt their credit scores. That period ended last fall. With the expiration of the “on-ramp,” the Department of Education restarted collections on defaulted federal student loans in May. The department sent notices to borrowers saying their tax refunds and federal benefits could be withheld starting in June if they don’t take steps to resume payments. (Borrowers fall into default when they are 270 days past due on loan payments.)

Wage garnishment is also set to restart this summer. 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. It is estimated that up to 2 million borrowers could be affected.