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Starting this summer, millions of U.S. borrowers with defaulted federal student loans face the resumption of aggressive debt collection measures, including wage garnishment, tax refund offsets, and reductions in Social Security benefits.
These actions come after the Trump istration reinstated collections on May 5, 2025, ending the pandemic-era protections that had paused such measures.
Understanding the impact of wage garnishment
Wage garnishment occurs when the government directs your employer to withhold a portion of your paycheck to repay your defaulted student loan debt. Typically, this amounts to 15% of your disposable income.
Additionally, the government may intercept tax refunds and Social Security benefits to recover the debt. These measures can significantly affect your financial stability.
As of early 2025, approximately 5.3 million federal student loan borrowers are in default, with many at risk of wage garnishment and other collection actions.
Steps to take before wage garnishment begins
If you're in default or at risk, consider the following actions to prevent or halt wage garnishment:
- Rehabilitate Your Loan
Loan rehabilitation involves making nine consecutive, voluntary, and on-time monthly payments. These payments are typically calculated as 15% of your annual discretionary income divided by 12. Successfully completing rehabilitation removes the default status from your loan and stops collection activities, including wage garnishment.
- Consolidate Your Loans
Consolidation involves combining your defaulted loans into a Direct Consolidation Loan. To qualify, you must either:
- Make three consecutive, voluntary, and on-time monthly payments on the defaulted loans.
- Agree to repay the consolidation loan under an income-driven repayment plan.
- Consolidation can restore your loans to good standing and end wage garnishment.
- Request a Hearing
If you believe wage garnishment would cause "extreme financial hardship," you have the right to request a hearing. You must submit a written request within 30 days of receiving the garnishment notice. During the hearing, you can present evidence of your financial situation to contest the garnishment.
- Pay Off the Debt in Full
If possible, paying off your defaulted loan in full can immediately stop wage garnishment and other collection actions. This option may require significant financial resources but can provide long-term relief.