Student-loan borrowers behind on payments could soon start seeing smaller paychecks.
President Donald Trump’s Department of Education confirmed to Business Insider on Tuesday that it will begin sending wage garnishment notices to defaulted student-loan borrowers in early January. The Washington Post was the first to report this update.
The department said that notices will go out to approximately 1,000 defaulted student-loan borrowers the week of January 7, and the notices “will increase in scale on a month-to-month basis.” The garnishment occurs only after borrowers have received notice and an opportunity to repay their loans, the department said.
This update follows the department’s announcement in April that it would restart collections on defaulted student loans in May, after a five-year pause. Over 5 million student-loan borrowers are in default, according to department data, which typically occurs after a federal borrower has payments that are more than 270 days past due.
More could soon enter default status — TransUnion reported 5.8 million newly delinquent borrowers in April, or over 90 days past due, meaning that if those borrowers don’t make payments, they could enter default and have their wages seized, in addition to withheld tax refunds and federal benefits like Social Security.
How student-loan borrowers in default can return to good standing
Borrowers in default have options to return to good standing, but they can be time-consuming and complicated. One option is loan rehabilitation, which requires a borrower to contact their servicer and sign an agreement to make nine payments within 20 days of the due date over a period of 10 consecutive months. Wage garnishment would continue during rehabilitation, but upon completion, the default status would be removed from the borrower’s credit report.
Another option is loan consolidation. During this process, a borrower can apply to consolidate their defaulted student loan into a federal direct loan, but the record of default would remain on the borrower’s credit history.
Linda McMahon, Trump’s education secretary, said when the collection resumption was first announced that the goal of the policy isn’t “to be unkind to student borrowers.”
“Borrowing money and failing to pay it back isn’t a victimless offense,” McMahon said. “Debt doesn’t go away; it gets transferred to others.”
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