Student Loan
Borrowers who have defaulted on federal student loans are being warned to prepare for the return of wage garnishment in 2026, as pandemic-era protections continue to expire. Pexels

The US Department of Education has confirmed it is reactivating its involuntary collection machine, a move that directly impacts about 5.3 million borrowers in default, as well as an additional 4 million currently in late-stage delinquency.

It is set to resume administrative wage garnishment, a process that allows the government to seize up to 15 per cent of a borrower's disposable income without a court order under Section 488A of the Higher Education Act.

Following a series of delays attributed to the record-long government shutdown earlier this year, the first wave of notices will be dispatched from 7 January 2026, with actual garnishments expected to hit paychecks shortly after the expiration of the 30-day legal warning period.

The policy applies to federal student loan holders across the United States, marking the end of a five-year reprieve that began during the initial COVID-19 pandemic response.

The restart of these collections marks a significant pivot in federal education policy, as the Trump administration seeks to 'restore fiscal common sense' to the $1.6 trillion (£1.27 trillion) student loan portfolio.

According to Department spokesperson Ellen Keast, the system had remained dormant for half a decade, and the technical re-engagement of the Treasury Offset Programme has proven more complex than initially anticipated.

Beyond paychecks, the government has already begun intercepting federal tax refunds and Social Security benefits, a move intended to shift the financial burden of unpaid debt away from taxpayers and back onto individual borrowers.

The Return of the Collection Machine

For millions currently in the 'danger zone' of delinquency, the restart of garnishment represents a severe escalation in the government's efforts to recoup funds. Unlike private debt, federal student loans afford the government unique powers; they can bypass the traditional legal system to instruct an employer to withhold wages directly.

Advocacy groups have warned that this 'draconian' return to collections comes at a time when many households are already struggling with the increased cost of living.

The end of the 'on-ramp' period on 30 September 2025 has already seen a sharp rise in missed payments. Borrowers who have not made a payment in 270 days (the federal threshold for default) are now being fed into a system that adds significant collection costs, often up to 25 per cent of the total balance, further ballooning the debt they are struggling to repay.

Legal Challenges and Political Fallout

The move has not gone without a fierce political response. Democratic lawmakers, including Senators Elizabeth Warren and Cory Booker, have reintroduced the Ending Administrative Garnishment Act of 2025, which aims to suspend the Secretary of Education, Linda McMahon, from garnishing wages for student debt. They argue that 'picking the pockets' of vulnerable workers is counterproductive to the broader economy.

However, the Trump administration has remained steadfast, with Press Secretary Karoline Leavitt asserting that 'debt cannot be wiped away' and that the previous administration's SAVE plan forgiveness schemes were 'illegal' bailouts that only served to mask rising default rates.

The administration's fiscal year 2026 budget proposal further underscores this stance, calling for deep cuts to the Department of Education's discretionary budget while doubling down on the enforcement of existing loan contracts.

Navigating the 30-Day Window

For the thousands of borrowers receiving the initial batch of notices in January, the clock is ticking.

By law, the Education Department must provide at least 30 days' notice before an employer can begin withholding funds. This narrow window offers the only opportunity for borrowers to challenge the garnishment or negotiate a voluntary repayment plan.

Options such as the Fresh Start initiative, which was extended to allow borrowers one final chance to restore their loans to 'in good standing' status before the full resumption of TOP (Treasury Offset Program) actions, remain available but require proactive borrower engagement.

As the 'default cliff' approaches in early 2026, the message from Washington is clear: the era of pandemic-related leniency is officially over, and the federal government is moving to collect its dues with renewed vigour.

Writer's pick