Student loan borrowers beware: if your loans have defaulted, you may see slightly smaller paychecks next year.
The Trump administration expects to garnish wages from defaulted student loan borrowers beginning in January. This move could impact millions of borrowers as the federal government intends to collect on these payments through the controversial method. It has not been in practice since before the COVID-19 pandemic, when the practice was paused.
A spokesperson from the U.S. Department of Education confirmed the update
to CNBC. Starting Jan. 7, approximately 1,000 defaulted borrowers will receive notices of their incoming wage garnishment. As the weeks pile on, the number of borrowers subject to this payment seizure will increase.According to the Department of Labor, wage garnishment is a legal process by which the government can withhold a portion of an employee’s wages to pay certain debts. Often, the move typically went toward child support payments. However, the Trump administration has since authorized its usage for student loans.
With over 5 million student loan borrowers in default and with millions more expected, many are at risk of losing a significant chunk of their paycheck. The news outlet reported that the government can withhold up to 15% of a borrower’s after-tax income. They can also take this payment from various sources, including tax refunds, disability benefits, and even Social Security checks.
So long as borrowers earn at least 30 times the federal minimum wage per week, totaling around $217, the process remains legal. However, this could result in borrowers feeling cash-strapped as the new year gets underway.
The impact of the incoming wage garnishment on the economy also remains a concern. With limited access to relief and job layoffs still prevalent, the payment seizure may affect even more individuals among the over 42 million Americans with student loans.
In the meantime, those with defaulted loans can still try t
o prevent wage garnishment by finding loan rehabilitation programs. Borrowers can also formally object to the notice and potentially refute the garnishment with a loan hearing.RELATED CONTENT: South Florida Cities Declare Dec. 12 ‘Saint Sauveur 1972 Haitian Heritage Rum Day’