December 24, 2025 · Economy, Trade & Fiscal Policy
· policy
Confirmed
Education Department to Resume Wage Garnishment for Defaulted Student Loan Borrowers
On December 22-23, 2025, the Trump administration announced that the Education Department would resume administrative wage garnishment for borrowers in default on federal student loans, starting the week of January 7, 2026. Roughly 1,000 borrowers were expected to receive initial garnishment notices, a number set to grow given that more than 5 million borrowers are currently in default, a figure that could climb toward 10 million.
This marks the first resumption of involuntary wage garnishment for student loan default since collections were paused during the COVID-19 pandemic roughly five years earlier. Under the program, the department can seize up to 15 percent of a borrower's after-tax income, though borrowers must be left with at least 30 times the federal minimum wage per week. Borrowers can request a hearing to contest garnishment on financial-hardship grounds.
Critics argue the policy substitutes enforcement for structural fixes to the student debt crisis, such as rising tuition and stagnant wages, and warn it will strain already financially vulnerable borrowers.
This marks the first resumption of involuntary wage garnishment for student loan default since collections were paused during the COVID-19 pandemic roughly five years earlier. Under the program, the department can seize up to 15 percent of a borrower's after-tax income, though borrowers must be left with at least 30 times the federal minimum wage per week. Borrowers can request a hearing to contest garnishment on financial-hardship grounds.
Critics argue the policy substitutes enforcement for structural fixes to the student debt crisis, such as rising tuition and stagnant wages, and warn it will strain already financially vulnerable borrowers.