US to Garnish Wages of 5.3M Defaulted Student Loan Borrowers

Key Takeaways

The U.S. Department of Education will resume wage garnishments for student loan borrowers in default, a move that will impact millions of households and has the potential to dampen consumer spending. The policy shift follows the end of pandemic-era payment relief measures.

1. The U.S. government will begin garnishing up to 15% of wages from student loan borrowers who are over 270 days delinquent on payments.
2. As of June, 5.3 million borrowers were in default on $117 billion, with an additional 4.3 million nearing default status.
3. The collections will start with an initial 1,000 notices in January 2026 and expand monthly, posing a risk to consumer discretionary spending.