Student-loan borrowers in default are set to see their paychecks garnished in early January

Published: Tuesday, December 23, 2025 at 4:03 pm

Student Loan Borrowers Face Wage Garnishment in January

Washington, D.C. - The Department of Education is set to begin garnishing the wages of defaulted student-loan borrowers in early January. The department confirmed to Business Insider that notices will be sent to those behind on their payments, potentially resulting in smaller paychecks.

The initial wave of notices, expected the week of January 7th, will affect approximately 1,000 borrowers. The department indicated that the scale of these notices will increase monthly. Wage garnishment will only occur after borrowers have been notified and given an opportunity to repay their loans.

This action follows the department's earlier announcement in April that it would restart collections on defaulted student loans, after a five-year hiatus. According to department data, over 5 million student-loan borrowers are currently in default, a status typically reached after payments are more than 270 days overdue.

The potential for further defaults looms. TransUnion reported a significant number of newly delinquent borrowers in April, who are over 90 days past due. If these borrowers fail to make payments, they could also face wage garnishment, as well as the withholding of tax refunds and federal benefits like Social Security.

Borrowers in default have options to regain good standing. Loan rehabilitation requires contacting the loan servicer and making nine payments within 20 days of the due date over a 10-month period. While wage garnishment continues during rehabilitation, successful completion removes the default status from the borrower's credit report. Another option is loan consolidation, which allows borrowers to consolidate their defaulted loan into a federal direct loan, though the default record remains on their credit history.

Education Secretary Linda McMahon has stated that the policy's goal is not to be unkind to borrowers, emphasizing that failing to repay borrowed money has consequences.

BNN's Perspective:

While the resumption of wage garnishment may be seen as a necessary measure to ensure the integrity of the student loan system and protect taxpayers, it is crucial that the Department of Education provides adequate support and resources to borrowers struggling with repayment. This includes clear communication about available options like loan rehabilitation and consolidation, as well as proactive measures to prevent borrowers from falling into default in the first place. Striking a balance between accountability and borrower support is essential.

Keywords: student loans, wage garnishment, default, Department of Education, borrowers, repayment, collections, loan rehabilitation, loan consolidation, Linda McMahon, federal loans, delinquent borrowers, payments

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