WASHINGTON D.C. — In a move that marks the definitive end of the pandemic-era leniency for student borrowers, the Trump administration has confirmed that it will begin seizing the paychecks of millions of Americans in default. Starting the week of January 7, 2026, the U.S. Department of Education will officially resume the practice of student loan garnishment, a powerful federal tool that has been largely dormant since March 2020.
According to a spokesperson for the Department of Education, led by Secretary Linda McMahon, the rollout will begin with approximately 1,000 “test” notices sent to defaulted borrowers. However, this is merely the tip of the iceberg. The department expects the volume of these notices to scale rapidly throughout the month, eventually targeting a significant portion of the 5 million to 10 million Americans currently estimated to be in default.
The Return of Federal “Extrajudicial” Powers
Unlike private debt collectors, the federal government does not need a court order to seize income. Under federal law, the Department of Education possesses “extrajudicial” powers that allow it to bypass the judicial system to recover defaulted student debt.
The resumption of these activities follows the administration’s decision in May 2025 to end the “on-ramp” period and the final remnants of the Covid-19 payment pause. While the government had already begun withholding federal tax refunds and seizing Social Security retirement and disability benefits earlier this year, the move to garnish wages—direct deductions from a worker’s private-sector paycheck—represents the most aggressive phase of the administration’s collection strategy.
How Student Loan Garnishment Works
For borrowers who are more than 270 days past due on their payments, the financial consequences are severe. Under the current guidelines:
- The 15% Rule: The Education Department can order an employer to withhold up to 15% of a borrower’s disposable pay (after-tax income).
- The Minimum Wage Protection: By law, the government must leave the borrower with a minimum amount of weekly income. This is calculated as 30 times the federal minimum wage ($7.25), totaling $217.50 per week.
- The 30-Day Warning: Borrowers must receive a notice at least 30 days before the garnishment begins. This window is the last chance for individuals to negotiate a settlement or enter a relief program.
A Perfect Economic Storm
The timing of the garnishment rollout is causing significant alarm among consumer advocates. Persis Yu, deputy executive director of the Student Borrower Protection Center, described the decision as “cruel and irresponsible,” noting that it coincides with a period of economic strain for many low-income households.
Advocates point out that January 2026 will also see many families grappling with increased costs for Affordable Care Act (ACA) health insurance premiums following the expiration of subsidies. For a borrower earning $3,000 a month after taxes, a 15% garnishment would result in a $450 monthly deduction—a loss that could mean the difference between paying rent or facing eviction.
The “Default Resolution” Pipeline
With the Education Department warning that the total number of defaulted borrowers could soon swell to 10 million, the system for resolving these debts is expected to be under immense pressure. The administration’s “Big Beautiful Bill,” signed into law in July 2025, has already begun phasing out several popular income-driven repayment (IDR) plans, such as the SAVE plan, leaving many borrowers with fewer options to avoid default in the first place.
Options to Avoid Garnishment:
- Loan Rehabilitation: This involves making nine “reasonable and affordable” on-time payments over a 10-month period. Once completed, the default is removed from the borrower’s credit history. Note: Most borrowers can only use this option once.
- Loan Consolidation: A faster route that allows borrowers to combine defaulted loans into a new Direct Consolidation Loan. This stops garnishment in 4–6 weeks but does not remove the default record from a credit report.
- The Default Resolution Group: Borrowers are urged to contact the government’s dedicated debt resolution line at 1-800-621-3115 to discuss payment arrangements before the January 7 deadline.
Looking Toward July 2026
The resumption of garnishment is just the first wave of changes. Starting July 1, 2026, the landscape of student lending will transform again. New borrowers will be limited to just two repayment options: a new Standard plan and the Repayment Assistance Plan (RAP). Additionally, the Graduate PLUS and Parent PLUS programs will face strict new borrowing caps, likely pushing more families toward private lenders who do not offer the same rehabilitation protections as federal loans.
As the first week of January approaches, the 42 million Americans holding a combined $1.6 trillion in student debt are entering a new era of accountability—one where the federal government is no longer willing to wait for payment.