Millions of Americans who have fallen behind on their federal student loan payments are bracing for a new wave of financial pressure as the Trump administration moves to resume wage garnishments in January 2026. According to statements from the U.S. Department of Education cited by ABC News, CNN, and FOX Television Stations, the first round of wage garnishment notices will be sent to approximately 1,000 borrowers in default during the week of January 7, with the scale of collections expected to increase month by month thereafter. This marks the first time since the onset of the COVID-19 pandemic that borrowers will face involuntary paycheck deductions for unpaid student debt.
Wage garnishment is a legal process in which an employer is required by court order to withhold a portion of an employee’s earnings to pay off a debt. Under federal law, as FOX Television Stations reports, up to 15% of a worker’s after-tax wages can be diverted to cover unpaid student loans. The Department of Education emphasized that these collections will only begin after borrowers have been provided with "sufficient notice and opportunity" to repay their loans, a requirement enshrined in the Higher Education Act of 1965 and the Debt Collection Improvement Act of 1996.
The move comes as part of a broader overhaul of the nearly $1.7 trillion federal student loan system, which affects more than 40 million Americans. Around 5 million borrowers are already in default—meaning they haven’t made payments for at least 270 days—while nearly 4 million more are considered delinquent, having missed payments for over 90 days, according to CNN and The Associated Press. The Department of Education predicts that, in the coming months, up to 25% of all student loan borrowers could be in default if current trends continue.
Collections on defaulted loans, including wage garnishment and the offsetting of tax refunds or Social Security benefits, had been paused since March 2020, when the first Trump administration halted referrals to collections at the start of the pandemic. That pause was extended several times under President Joe Biden, but repayments resumed in October 2023 after Congress blocked further extensions. The Trump administration announced in May 2025 that it would restart involuntary collections, a move that has since drawn both praise and fierce criticism from various quarters.
Advocacy groups and some lawmakers have condemned the decision as unnecessarily punitive. Persis Yu, deputy executive director and managing counsel of Protect Borrowers, argued in statements to ABC News and CNN that, “As millions of borrowers sit on the precipice of default, this Administration is using its self-inflicted limited resources to seize borrowers’ wages instead of defending borrowers’ right to affordable payments.” She called the administration’s decision "cruel, unnecessary, and irresponsible," especially as many families continue to struggle with stagnant wages and what she termed an "affordability crisis."
On Capitol Hill, Democratic lawmakers have moved to block the resumption of wage garnishments. Representative Ayanna Pressley, joined by Senators Elizabeth Warren and Cory Booker, introduced legislation in May 2025 that would halt the Department of Education’s authority to seize wages, tax refunds, and Social Security payments from defaulted borrowers. Pressley stated, “No one should have their hard-earned wages, tax refunds, and Social Security checks seized by Donald Trump—and our bill would ensure they do not.” She further criticized the administration for "picking the pockets of our most vulnerable borrowers" and exacerbating the student debt crisis.
From the administration’s perspective, the resumption of collections is part of a broader effort to restore fiscal discipline to the federal student loan portfolio and protect taxpayers. Education Secretary Linda McMahon told The Associated Press, “Going forward, the Department of Education, in conjunction with the Department of Treasury, will shepherd the student loan program responsibly and according to the law, which means helping borrowers return to repayment—both for the sake of their own financial health and our nation’s economic outlook.” McMahon has also stressed that the department is simplifying the "overly complex" repayment process and working to reduce borrowing amounts to help curb rising tuition costs. Discussions are ongoing about potentially moving student loan oversight from the Department of Education to the Department of Treasury, though no final decisions have been made.
The Trump administration’s recent legislative package, dubbed the “One Big Beautiful Bill Act,” has introduced sweeping changes to the student loan landscape. As reported by CNN and The Associated Press, the law caps how much students can borrow for graduate school and how much parents can borrow to help pay for tuition. It also eliminates certain deferments and hardship provisions, further restricting options for borrowers in financial distress. Several repayment plans—including the Saving on a Valuable Education (SAVE) plan, Pay As You Earn (PAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR)—are being phased out, leaving a narrower set of repayment options for future borrowers. The SAVE plan, a Biden-era initiative that had enrolled more than 7 million borrowers, was terminated in December 2025, pending federal court approval.
For borrowers who have already defaulted, the consequences are stark. According to the Department of Education’s website, those in default can no longer receive deferment or forbearance, nor can they choose a new repayment plan. The only remaining avenue for relief may be through bankruptcy, which requires meeting stringent criteria to discharge federal student loans—a notoriously difficult process.
The resumption of wage garnishments and the broader restructuring of the student loan system come at a time of mounting anxiety for borrowers and their families. The end of pandemic-era protections means that, for the first time in nearly six years, millions will once again face the prospect of having their paychecks, tax refunds, or even Social Security benefits seized to repay old debts. As the political battle over student debt intensifies, the future of federal student loans remains uncertain, with borrowers caught in the crossfire of competing visions for higher education finance in America.
With the first garnishment notices set to go out in early January 2026, borrowers, advocates, and policymakers alike are watching closely to see how these changes will play out—and what new challenges and opportunities may emerge in the ever-evolving landscape of student debt.
