Federal student loan borrowers who have defaulted on their loans could soon see their paychecks shrink as the Department of Education resumes garnishing wages over the unpaid debts.
Around 1,000 defaulted borrowers were expected to receive notification of wage garnishments the week of Jan. 7, a department spokesperson told CNBC in December. The number of notified borrowers is expected to grow. Wage garnishments were initially paused in 2020 in response to the Covid-19 pandemic.
The federal government has the authority to seize portions of borrowers’ wages, federal tax refunds and Social Security retirement and disability benefits if they default on their loans, which occurs if they are at least 270 days late on a payment. The Department of Education first resumed the Treasury Offset program, which seizes defaulted borrowers’ federal payments, on May 5, 2025.
Borrowers will be notified 65 days prior to having their federal payments seized and 30 days prior to having their wages impacted, according to Federal Student Aid. The government can seize up to 15% of your disposable income, defined as your income after mandatory deductions like taxes, until you repay the loan in full or bring it out of default.
Wage garnishment takes some of borrowers’ money out of their control entirely, which can make a difficult situation worse if they are struggling with other commitments like rent or car payments, says Sophoan Prak, a financial advisor at Vanguard. More than 40% of borrowers report making tradeoffs between their loan payments and basic needs, a survey from The Institute for College Access and Success found in December.
If you’ve been informed of upcoming wage garnishment, there are steps you can take to protect your paycheck, but you need to act quickly.
“Communication and early action are critical,” Prak says. “Wage garnishment doesn’t have to derail your financial future if you take steps now to regain control.”
Here’s what borrowers can do.
Negotiate a repayment plan
If your loans are in default and you have been notified of collection activity like wage garnishment, “the first thing [you] should immediately do is try to get [your] loans out of default,” Kyra Taylor, staff attorney at the National Consumer Law Center, says.
One solution is to repay the defaulted student loan in full. If that’s not possible, you may need to enter loan rehabilitation, in which borrowers negotiate a repayment plan with their servicer and must make nine consecutive, on-time monthly payments.
Wages may still be garnished while you rehabilitate your loans, but it is legally required to stop after five monthly payments, says Bruce McClary, a senior vice president at the National Foundation for Credit Counseling. Garnishments or the seizure of federal payments do not count toward rehabilitation loan payments.
You may be able to avoid wage garnishment by negotiating a payment plan with your loan servicer and making the first payment within 30 days of the wage garnishment notice, according to Federal Student Aid. Your payment could be as low as $5 a month on a negotiated plan, the agency says. You may only rehabilitate each loan once, however, so if you default again this will not be an option.
How to object to wage garnishment
Borrowers facing wage garnishment can request a hearing if they object to it for one of the following reasons:
- The amount, enforceability or existence of your debt is in question
- A 15% wage garnishment would produce an extreme financial hardship
- You’ve been employed for less than 12 months after having previously been involuntarily separated from employment
- You are eligible to have the loan discharged under statutory programs like Total Disability Discharge or Borrower Defense to Repayment — when you’ve been defrauded by your educational institution
You must make a request for a hearing in writing, postmarked no more than 30 days after the notice of garnishment. You will need to provide documentation to support your objection and pay any legal expenses or travel fees associated with attending an in-person hearing. Hearings may be held in-person or over the phone, or may be decided based on the documentation you submit with your hearing request.
“It is very important that the borrower clearly explain their basis for an objection and provide evidence supporting their objection to the wage garnishment,” Taylor says. “A hearing officer — generally a Department of Education employee — will provide a written decision on the request for a hearing.”
A decision on your wage garnishment will typically be made within 60 days of your hearing request, Federal Student Aid says. As a result, you could see your wage garnishment paused for up to 12 months, reduced below 15% of your income or enforced at the full 15% allowed.
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