Federal student loan borrowers who have defaulted on their loans could soon see their paychecks shrink as the Department of Education resumes garnishing wages over the unpaid debts.
Around 1,000 defaulted borrowers were expected to receive notification of wage garnishments the week of Jan. 7, a department spokesperson told CNBC in December. The number of notified borrowers is expected to grow. Wage garnishments were initially paused in 2020 in response to the Covid-19 pandemic.
The federal government has the authority to seize portions of borrowers’ wages, federal tax refunds and Social Security retirement and disability benefits if they default on their loans, which occurs if they are at least 270 days late on a payment. The Department of Education first resumed the Treasury Offset program, which seizes defaulted borrowers’ federal payments, on May 5, 2025.
Borrowers will be notified 65 days prior to having their federal payments seized and 30 days prior to having their wages impacted, according to Federal Student Aid. The government can seize up to 15% of your disposable income, defined as your income after mandatory deductions like taxes, until you repay the loan in full or bring it out of default.
