The Trump administration will start taking money directly from the paychecks of some student loan borrowers beginning in January, the US Department of Education has said. This applies to people who have not paid their federal student loans for a long time and are officially in default. The move is part of a bigger push to collect unpaid student loans, which began earlier this year after years of pandemic relief.
Student loan borrowers to face wage cuts starting January
Starting the week of January 7, around 1,000 borrowers who are already in default will receive official notices from the Education Department. These notices will tell them that the government is preparing to collect money from their wages.
According to the department, the number of such notices will grow every month as the year goes on. An email shared by the department said borrowers are contacted only after they have been given enough warning and chances to repay their loans. However, the email did not mention how much money would be taken from paychecks.
Pandemic relief is officially over
The recent move follows the end of a five-year break on student loan collections. That pause began in March 2020, during the COVID-19 pandemic, when borrowers were allowed to stop payments without penalties.
In May this year, the Trump administration officially ended that relief. Forced collections on defaulted federal student loans resumed. This allows the government to withhold tax refunds and other federal payments to recover unpaid debt.
While loan payments restarted in October 2023 after several extensions under the Biden administration, borrowers were not punished for missing payments until last year.
Millions already in trouble
Right now, the numbers are worrying. Around 5.5 million borrowers are already in default, according to new data analysed by the American Enterprise Institute, a public policy think tank.
Another 3.7 million borrowers are more than 270 days late on their payments, which puts them on the edge of default. An additional 2.7 million are in the early stages of falling behind, according to NBC. Altogether, nearly 12 million people are either behind on their loans or fully in default. That means more than one in four federal student loan borrowers is struggling to keep up.
What “default” really means
A borrower is considered in default when they fail to make loan payments for more than 270 days. Once that happens, the federal government has power to recover the money. It can take tax refunds, seize a portion of Social Security benefits, and order employers to withhold part of a borrower’s salary.
By law, employers can be told to deduct up to 15% of a borrower’s wages. Before this happens, the Education Department must send a 30-day warning notice.
The Education Department has confirmed to NPR that wage garnishment will resume fully in early 2026. This comes after a long pause during the pandemic, when wage cuts were temporarily stopped.