Student Loan Wage Garnishment Is Returning in January 2026

The Education Department will begin garnishing the wages of borrowers who are in default on their federal student loans starting in January, according to reporting by The Washington Post and The New York Times this week.The department will start issuing wage garnishment notices to borrowers by the second week of the New Year, with additional notices to follow.Student loan borrower advocates slammed the development, arguing that garnishing borrowers’ wages in the current economic conditions could be financially catastrophic for millions of Americans.“At a time when families across the country are struggling with stagnant wages and an affordability crisis, this Administration's decision to garnish wages from defaulted student loan borrowers is cruel, unnecessary, and irresponsible,” said Protect Borrowers in a statement on Tuesday.

“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.” The announcement marks a significant escalation by the Trump administration to pursue borrowers in default on their student loans while narrowing existing repayment options for other borrowers.Earlier this year, the Education Department began referring defaulted student loan borrowers to the Treasury Offset program, which allows the government to seize federal tax refunds and other federal income streams, such as Social Security benefits.And earlier this month, the department entered into a settlement agreement to terminate the SAVE plan, a Biden-era repayment program designed to lower student loan payments.Here's what’s going on with wage garnishment, and what borrowers who have defaulted federal student loans should know.

Defaulting on student loans has serious consequences Defaulting on federal student loans has significant implications for borrowers.Default typically occurs after a borrower has been delinquent, or behind on their payments, for at least 270 days (roughly the equivalent of 9 months).  The federal government has powerful tools that can be utilized to force defaulted student loan borrowers to repay their debts.These tools allow the government to intercept federal tax refunds, offset federal benefits such as Social Security, and garnish a borrower’s wages, all without needing to go through the court system or file a formal lawsuit.“If you fall behind on your student loan payments, you need to act quickly to avoid defaulting on your debt,” said the National Consumer Law Center in a blog post explaining the consequences of defaulting on federal student loans.

“If you default on your federal student loan debt, the federal government has powerful tools to collect on the debt.The government may be able to garnish your wages, seize your federal tax refunds, and even take a portion of your Social Security benefits to collect on your student loan debt.” The Education Department can also report the defaults to national credit bureaus, wrecking a borrower’s credit score.And the department can deny new federal student aid to the borrower while they remain in a default status, preventing them from returning to school to complete a degree or to obtain a new certification or credential.  Defaults on federal student loans are surging At least 5.5 million borrowers are already in default on their federal student loans, according to Education Department data.And those numbers are expected to surge in the coming months as millions of additional borrowers struggle with their payments and fall behind on their obligations.  As of October 2025, “more than 5.5 million borrowers with over $140 billion in outstanding federal student loans were in default,” said The Institute for College Access and Success (TICAS) in a blog post earlier this month.

“In addition, 1.17 million borrowers were 30-89 days delinquent, 1.56 million were 90-269 days delinquent, and 3.68 million were 270+ days delinquent.” If all of these delinquent borrowers fall into default, more than 10 million borrowers could be facing the associated collections consequences by the time the department initiates wage garnishment proceedings in January.TICAS noted that borrowers now have fewer repayment plan options to manage their federal student loans due to legal and legislative changes to repayment programs, which are potentially contributing to the surge in delinquencies and defaults.And with mass layoffs at the Education Department and ongoing backlogs, processing delays, and long call wait times associated with student loan servicing, many borrowers are struggling to find a path forward.“Ultimately, borrowers today have fewer resources than ever to navigate their repayment options, and those options are ever shifting,” said TICAS.

“The Education Department has been gutted, with hundreds of experts now gone from the Office of Federal Student Aid, which administers the federal student loan program and oversees the federal government’s contracted loan servicers.These cuts have eroded the Department’s ability to identify and correct servicing issues and to properly communicate with borrowers.Meanwhile, servicers are scrambling to comply with a stream of changes to the repayment system driven by the recently enacted reconciliation law and ongoing legal challenges to the SAVE repayment plan.For many borrowers, this is likely to mean default.” What borrowers in default on their federal student loans can do The good news is that borrowers in default on their federal student loans have options.

They may be able to undo their defaults and restore their loans back to good standing.That would allow them to avoid wage garnishment and other involuntary collections consequences, while accessing affordable repayment plans and potentially getting on track for eventual student loan forgiveness.  “Take steps now to make sure your loans aren’t in default!” warned the National Consumer Law Center in its blog post.“If you are in default, act quickly to get out of default and avoid collections… You can’t get back into good standing simply by making or restarting your loan payments.When you have been transferred to a default servicer, you can only get your loans back into good standing through a consolidation or loan rehabilitation, or by discharging them through a cancellation or discharge program.” Borrowers who qualify can potentially pursue an administrative discharge of their federal student loans.

For example, borrowers suffering from a medical impairment that prevents them from maintaining substantial, gainful employment can apply for relief through the Total and Permanent Disability (TPD) discharge program.  Other borrowers can get out of default through loan rehabilitation or Direct loan consolidation.Rehabilitation is a temporary payment plan tied to a borrower’s income that results in the borrower’s student loans being restored to good standing.And Direct loan consolidation involves taking out a new federal student loan through the Education Department that repays the student loans that are in default.  However, borrowers should carefully evaluate the potential benefits and drawbacks of both of these options.For example, rehabilitation takes a minimum of nine months to complete, and sometimes longer.

Pursuing Direct loan consolidation could result in the erasure of any past credit the borrower had earned toward student loan forgiveness under income-driven repayment plans.Ultimately, borrowers in default on their federal student loans may have options.But the time to start evaluating those options is now.Borrowers should receive a formal written notice from the Education Department prior to wage garnishment being initiated, but once that letter is issued, there’s a limited time window to respond.

And once a borrower’s wages have started to be garnished, options for getting their student loans out of default may be narrowed.