What to Do If You Receive a Wage Garnishment Notice: A Checklist for Student Loan Borrowers

With the Trump Administration set to issue wage garnishment notices to defaulted student loan borrowers this week, critics believe the move could further increase the financial strain on millions of Americans already grappling with rising living costs.

The US Education Department revealed in April 2025 that over 5 million borrowers were in default, with an additional 4 million considered delinquent. The department has indicated that the total number of defaulted student loan borrowers could even climb to 10 million.

This wage garnishment will be the first since the COVID-19 pandemic in 2020 that borrowers' paycheques are at risk of involuntary withholding.

The US government wields significant authority when it comes to federal student loans. It can seize tax refunds, wages, and even Social Security benefits. Moreover, the government can instruct non-federal employers to withhold a portion of an employee's income to offset outstanding student loan debt. Notably, the Education Department can seize up to 15% of a student loan borrower's post-tax income to repay their debt.

Wage Garnishment Workflow

Unlike private student loan garnishment, which requires a court lawsuit and a judgment before wages can be withheld, federal student loan wage garnishment begins with a formal notice issued by the Education Department.

Garnishment applies to borrowers who have entered default after missing 270 days of payments.

Once the notice is issued, defaulters have a 30-day window to respond before wage withholding begins. If no response is received within this period, the government will issue an order to the employer to start withholding wages in accordance with applicable laws.

Once the garnishment commences, the outstanding debt is treated as an enforced collection, which can severely limit options such as loan consolidation or rehabilitation, as collection activity is essentially enforced by law.

What Defaulters Can Do To Avoid Paycheque Deductions

Borrowers facing wage garnishment can utilise the 30-day response window to explore options for removing their debt from collection. One such option is loan consolidation, which can replace the defaulted loan with a new, non-defaulted one and halt collection activity.

If wage garnishment is already active, loan rehabilitation offers a way to end the deductions, although it may take time. Under this process, defaulters agree to make five consecutive, qualifying monthly payments. Successfully completing these payments revokes the wage garnishment and transfers the debt out of collections.

Once the loan is no longer in default, borrowers gain access to income-driven repayment plans and federal forgiveness programmes. While the default remains on their credit record, collection activity ceases.

Additionally, defaulters can submit a financial hardship request to reduce or temporarily halt wage garnishment. However, this does not remove the default status or permanently end collections. Instead, it prioritises how much is deducted from the paycheque.

A hardship request involves a hearing process with the Education Department's collection division. If approved, garnishment may be reduced or suspended temporarily based on the borrower's basic living expenses.

Finally, bankruptcy is the only avenue that can immediately halt federal student loan wage garnishment. Upon filing for bankruptcy, an automatic stay takes effect, requiring the court to order the Education Department to cease wage garnishment and other collection efforts while the case is pending.

When other options are exhausted or ineffective, bankruptcy can serve as a legal tool to pause enforcement actions, offering relief in extreme circumstances.