Student loan wage garnishment: What it means and 5 ways to avoid it

After a five-year pause, the US government has officially resumed collections on defaulted federal student loans, triggering serious consequences for millions of borrowers across the country, as reported by Forbes. 

As of May 5, 2025, involuntary debt collection efforts—including wage garnishment, tax refund seizures, and Social Security benefit reductions—are once again in effect.

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Roughly 5 million borrowers are currently in default on their federal student loans, with an additional 4 million in immediate danger of slipping into default. Together, these 9 million individuals now face potential legal and financial actions from the US Department of Education and Department of the Treasury.

What is wage garnishment?

Wage garnishment allows the government to deduct a portion of a borrower’s paycheck—up to 15% of disposable income—without requiring a court order. This process is automatic once a borrower is in default and after a formal notice period. Many borrowers will receive a "Notice of Intent to Garnish Wages," which provides a brief window to take corrective action, as reported by Forbes. 

Five ways borrowers can avoid or stop garnishment

Borrowers in default still have time and legal options to either prevent garnishment or stop it once it has begun. These include:

Loan rehabilitation

Making nine consecutive, on-time monthly payments under a special arrangement can remove the loan from default status, stop garnishment, and help repair credit damage.

Loan consolidation

A defaulted loan can be consolidated into a new Direct Consolidation Loan. Borrowers must either make three voluntary payments or agree to repay the new loan under an income-driven repayment (IDR) plan to qualify. This option can provide a fresh start, often within weeks.

Income-driven repayment (IDR) plans

These plans adjust monthly loan payments based on a borrower's income and family size. While IDR plans don’t directly cure default on their own, they are a required step in the consolidation process and help prevent future defaults.

Requesting a Hearing

Borrowers have the right to challenge wage garnishment if it would cause undue financial hardship. A request must be submitted within 30 days of receiving the garnishment notice. Documentation, such as bills, pay stubs, or medical records, may be required.

Full repayment of the loan

Paying off the full loan amount in a lump sum ends the garnishment and closes the default case. While not a realistic option for most, it is a guaranteed way to resolve the matter.

Why acting now matters

With collections officially resumed, time is critical. Ignoring notices or failing to act could result in immediate wage garnishment, damaged credit, and other lasting financial repercussions. While some borrowers may not even be aware they are in default, the consequences can begin quickly once garnishment is triggered.

Financial experts recommend that anyone unsure of their loan status immediately check their account through the government’s loan portal and contact the Default Resolution Group to explore resolution options.