The Trump administration will begin seizing the pay of people in default on their student loans early next year, marking the first wave of new wage garnishments since the pandemic, the Education Department confirmed Monday.
Starting the week of Jan. 7, the department told The Washington Post, it will notify approximately 1,000 defaulted borrowers of plans to withhold a portion of their wages to pay down their past-due debt. After that, the department said notices will be sent to larger numbers of borrowers each month.
There were about 5.3 million borrowers who had not made a payment on their federal student loans for at least 360 days as of June 30, according to the latest available data from the Education Department. Many of them were in default before the federal government stopped collecting defaulted loans because of the pandemic nearly six years ago.
In May, the Trump administration resumed seizing tax refunds and Social Security benefits to recoup past-due student loan debt. At the time, the administration said wage garnishments would restart in the summer.
While the Education Department started the process over the summer, department spokesperson Ellen Keast said turning on the system after it was dormant for five years took more time than expected. She said the record-long government shutdown further delayed the process.
There are several steps involved in wage garnishment, including identifying and verifying a borrower’s employer, who is ultimately responsible for withholding the money. By law, the Education Department must notify people in default 30 days before garnishing their wages. During that time, borrowers can request a hearing to challenge the order, pay the balance or negotiate repayment terms to avoid garnishment.
The department can withhold up to 15 percent of a borrower’s disposable, or after-tax, income. The garnishment continues until the defaulted loans are paid off in full or the borrower takes action to get out of default.
Roughly 6 million people were at least 60 days late on their student loan payments as of August, according to an analysis of credit reporting data by the think tank Urban Institute.
The rise in delinquencies corresponds with the end of a 12-month grace period, known as the on-ramp, that allowed borrowers to ease their way back into repayment after a pandemic-related pause that lasted more than three years. Since the Biden administration’s policy ended Sept. 30, millions of borrowers have fallen behind on payments. And many of them could wind up in default.
Student loan borrowers have been spared from the most severe consequences of default since the early days of the pandemic. Back then, President Donald Trump instituted a moratorium on the collection of defaulted student loans that Congress later codified and extended in the 2020 stimulus package.
President Joe Biden’s administration extended the moratorium several times as part of the broader suspension of student loan payments. Under pressure from liberal lawmakers and student advocates, Biden had allowed anyone in default on a federal loan held by the Education Department to rehabilitate the debt through an initiative called Fresh Start. While a portion of borrowers resolved their debt through the initiative, many remained in default.
Education Secretary Linda McMahon has called Biden’s policies irresponsible and blamed his administration for giving borrowers false hope of loan forgiveness that had led to a rise in delinquencies.
When the Education Department announced the resumption of involuntary collection in April, McMahon said, “the Biden Administration misled borrowers: the executive branch does not have the constitutional authority to wipe debt away, nor do the loan balances simply disappear.”
Instead of promoting debt cancellation, McMahon said the Trump administration will help borrowers return to repayment — “both for the sake of their own financial health and our nation’s economic outlook.”
The post Government to resume garnishing wages for defaulted student loans early next year appeared first on Washington Post.
