Trump Administration to Resume Wage Garnishment for Student Loan Defaulters
The Trump administration has announced plans to start garnishing the wages of student loan borrowers in default, beginning in early January. This move marks the first time since the start of the Covid pandemic that collection activity on defaulted student loans will resume. According to a spokesperson for the U.S. Department of Education, around 1,000 defaulted student loan borrowers will receive notices of administrative wage garnishment during the week of January 7, with the number of notified borrowers expected to increase thereafter.
The U.S. government has significant collection powers when it comes to federal debts, including the ability to seize borrowers’ federal tax refunds, wages, and Social Security retirement and disability benefits. In the case of student loan defaulters, the Education Department can seize up to 15% of a borrower’s after-tax income to put toward their debt. However, borrowers must be left with at least 30 times the federal minimum hourly wage ($7.25) per week, which is $217.50, according to higher education expert Mark Kantrowitz.
Impact on Student Loan Borrowers
Student loan holders are already facing significant pressure due to a weakening labor market, changes to the lending system, and difficulties accessing relief programs. With over 5 million student loan borrowers currently in default, and a potential total of 10 million borrowers at risk of default, the resumption of wage garnishment is likely to have a significant impact. The outstanding student loan debt in the United States exceeds $1.6 trillion, with more than 42 million Americans holding student loans.
To avoid wage garnishment, consumer advocates recommend that student loan borrowers contact the government’s Default Resolution Group and explore options for getting current on their loans, such as signing up for loan rehabilitation. Borrowers who are struggling to make payments should take proactive steps to address their debt and avoid the potential consequences of wage garnishment.
Seeking Help and Avoiding Default
For borrowers who are struggling to make payments, it is essential to seek help and explore options for avoiding default. This may include contacting the loan servicer, seeking guidance from a financial advisor, or exploring income-driven repayment plans. By taking proactive steps, borrowers can avoid the potential consequences of wage garnishment and work towards getting their debt under control.
Smart Tip for Readers
If you are a student loan borrower at risk of default, consider contacting the government’s Default Resolution Group to explore options for getting current on your loan, and be sure to review your budget and payment options carefully to avoid wage garnishment. For more information on this topic, visit Here
