Federal Action on Student Loan Defaults Set to Resume in 2026
After a pandemic-induced pause, the U.S. Education Department will recommence wage garnishment for student loan borrowers in default, starting early 2026. This decision marks a significant shift after years of relief for borrowers.
According to a department spokesperson, the initial notices will be dispatched to around 1,000 borrowers in default during the week of January 7. These wage garnishment notifications are expected to increase incrementally each month throughout the year.
Default occurs when a borrower fails to make loan payments for over 270 days. In such cases, the federal government has the authority to recover the debt by intercepting tax refunds, Social Security benefits, and instructing employers to withhold up to 15% of the borrower’s pay. Borrowers will receive a 30-day warning from the Education Department prior to the initiation of wage garnishment.
Betsy Mayotte, president and founder of The Institute of Student Loan Advisors, acknowledged the inevitability of this move but noted its unfortunate timing. “It will coincide with the increase in health care costs for many of these defaulted borrowers,” she remarked. The anticipated premium hikes for Affordable Care Act health insurance in 2026 are likely to exacerbate financial pressures on low and middle-income borrowers.
Recent data from the American Enterprise Institute (AEI), a policy research organization, reveals that approximately 5.5 million borrowers are currently in default on their loans. Additionally, 3.7 million borrowers have payments overdue by more than 270 days, and 2.7 million are in the initial stages of delinquency.
Preston Cooper, a student loan policy analyst at AEI, shared with NPR, “We’ve got about 12 million borrowers right now who are either delinquent on their loans or in default.” This figure accounts for over 25% of all federal student loan borrowers.
Cory Turner contributed to this story.
