Millions of student loan borrowers are about to see their paychecks shrink

The Department of Education said Monday that the Trump administration will begin to garnish earnings from student loan borrowers in January. 

This is the first time borrowers’ paychecks will be at risk since pandemic-era policies paused payments in March 2020. 

Starting the week of January 7, around 1,000 borrowers in default will get notices of their status. The number of notices will increase every month throughout 2026, according to an email from the Education Department reviewed by several news organizations. 

According to quarterly reports from the Education Department, as of June 30, there were about 5.3 million borrowers in default. 

An individual is in default on their student loans if they have not made a payment in over 270 days. After this deadline, the Treasury Department can collect the debt by ordering an employer to withhold up to 15 percent of a borrower’s pay and taking income tax refunds and federal payments like Social Security benefits. The Education Department must notify people in default 30 days before taking their wages. During that window, people can request a hearing to challenge the order or negotiate repayment terms. 

Earnings can be withheld until the loan is paid in full or the individual is removed from default status, but the New York Times reported that the Monday email from the Education Department did not say how much would be deducted from wages. 

This past April, when the department announced it would resume collecting defaulted student loans, it said that 4 million borrowers are in late-state delinquency, meaning they had not made a payment in 91–180 days. “As a result there could be almost 10 million borrowers in default in a few months.” 

“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” US Secretary of Education Linda McMahon said at the time.

In May, the Trump administration restarted taking tax refunds and Social Security benefits.

This comes at a horrible time for borrowers. As I reported last week, the 20 million–plus people enrolled in the Affordable Care Act’s health insurance marketplace will experience huge spikes in premium costs. Additionally, two weeks ago, the Education Department ended Biden’s student loan forgiveness program for being too generous.

But as McMahon said in April, the Department of Education will help “borrowers return to repayment—both for the sake of their own financial health and our nation’s economic outlook.”