The U.S. Department of Education has confirmed that it will begin administering wage garnishment for federal student loan borrowers in default starting the week of January 7, 2026. In its May 5, 2025 announcement, the Department clarified that administrative wage garnishment—alongside other collection methods already restarted—will follow an initial resumption of collections aimed at recovering unpaid federal student loans.
Initially, about 1,000 defaulted borrowers will receive notices requiring their employers to withhold up to 15% of their disposable (after-tax) wages, with the number gradually increasing each month. Federal law requires that borrowers retain at least 30 times the federal minimum wage, currently approximately $217.50 per week.
Borrowers who have not made payments on their federal student loans for at least 270 days are placed in default. At this point, the Department’s Default Resolution Group may initiate wage garnishment without a court order. However, borrowers receive a 30-day advance notice, during which they can request a hearing, dispute the garnishment, and may opt for loan rehabilitation or consolidation to exit default before garnishment begins.
This policy update is part of a broader effort to resume collection tools that were previously paused. Since May 2025, the Department has reactivated the Treasury Offset Program, which can withhold tax refunds and federal payments, and has also restarted social security benefit offsets.
According to Department data, more than 42 million Americans hold federal student loan debt totaling over $1.6 trillion, with over 5 million borrowers in default and another 4 million in late-stage delinquency. If current delinquency trends persist, the number in default could swell to 10 million, representing about 25% of all federal student loan borrowers.
The Department also issued a “Dear Colleague” letter to colleges and universities, urging them to remind former students of their repayment responsibilities under the Higher Education Act. This initiative emphasizes institutional support as a complement to federal collection efforts.
Low-income students and families—particularly in Black and Hispanic communities—face compounded hardship as wage garnishment resumes in early 2026. These groups are already more likely to default due to systemic inequities such as lower household wealth and limited access to affordable repayment options.
Now that the enhanced ACA health insurance subsidies expire on January 1, 2026, many families are seeing higher healthcare costs, and up to 15% of their disposable income may be withheld for student loan repayments. This dual financial pressure forces difficult trade-offs between essentials like housing, food, and medical care, deepening economic instability and widening racial wealth gaps in affected communities.
Abdullahi Hussein is a community journalist focused on uplifting immigrant voices and local stories in Boston. He is also our director of editorial and development.
