Wage Garnishment Looms for Defaulted Student Loan Borrowers

The Trump administration is set to start garnishing wages of student loan borrowers who have defaulted, by early next year. Despite efforts for leniency, the action marks a shift towards stricter debt collection as the Biden administration attempts to extend some grace period amidst an affordability crisis.

The Trump administration announced plans to begin wage garnishment for student loan borrowers in default starting early next year. Notices to approximately 1,000 borrowers will be issued in the week of January 7, 2024, with more notifications expected later.

Default status is applied to borrowers 270 days overdue on payments. Before garnishment, borrowers must receive a 30-day notice. The administration is resuming collections, which were paused due to the pandemic, ending leniency and restarting payments in October 2023, while the Biden administration offered a one-year grace period.

Criticism emerged from Persis Yu of the Student Borrower Protection Center, labeling the decision to garnish wages amid wage stagnation and affordability struggles as "cruel" and "unnecessary." The debate continues over priorities in addressing defaulted loans.

(With inputs from agencies.)