U.S. Education Dept. Resumes Student Loan Wage Garnishment

The U.S. Department of Education announced this week that it will resume wage garnishment for federal student loan borrowers in default, marking the first such collections since the onset of the coronavirus pandemic in March 2020. The process will begin with notices sent to approximately 1,000 borrowers during the week of January 7, with the number of notifications increasing each month throughout the year.

Borrowers enter default status after failing to make payments for 270 days. As of June 30, about 5.3 million individuals were in default, according to department reports. An additional 4 million borrowers were in late-stage delinquency, having missed payments for 91 to 180 days, which could push the total number of defaults toward 10 million in the coming months. Under federal law, the Treasury Department can direct employers to withhold up to 15 percent of a borrower's disposable pay, along with income tax refunds and certain federal benefits such as Social Security payments. The department is required to provide at least 30 days' notice before initiating wage withholding, during which borrowers can request a hearing, challenge the action or negotiate alternative repayment...