Student Loan Defaults and Wage Garnishment: Steps You Can Take Before It Hits Your Pay

After nearly five years of relief, the U.S. Department of Education is resuming collections on defaulted federal student loans. As of May 5, 2025, wage garnishment is back in effect, and millions of borrowers may start to see smaller paychecks as soon as this summer.

If you’re one of the estimated 5 million borrowers currently in default, or among the 4 million more at risk of defaulting, now is the time to take action. You don’t need to spend your summer worrying about garnishment—you can get ahead of it.

What Is Wage Garnishment?

Wage garnishment is when the government directs your employer to withhold a portion of your paycheck to repay defaulted student loans. For federal student loans, this can be up to 15% of your “disposable income” — the amount left after taxes and other required deductions.

Here’s a simplified example:

• If your biweekly gross pay is $2,000
• And your mandatory deductions (like taxes, Social Security) total $400
• Your disposable income is $1,600
• 15% of $1,600 is $240

That means your take-home pay could drop from $1,600 to $1,360 every two weeks. Gulp.

What Makes Garnishment More Concerning This Year

Many borrowers aren’t aware that employers are contacted directly. The federal government sends a formal letter by mail to your company, notifying them of your student loan default and the requirement to garnish your wages. While it may not lead to an awkward conversation, knowing that someone in HR or payroll is aware of your situation can feel a bit embarrassing.

This is another reason to act now – to prevent the garnishment from ever happening.

Garnishment Thresholds That Offer Some Protection

The law does offer a bit of protection for lower-income workers. Under the Consumer Credit Protection Act (CCPA), there are minimum disposable income thresholds under which no garnishment will occur:

If your earnings are above these amounts, the garnishment will only apply to the portion above the threshold, up to 15%. 

Examples: What You Might See in Your Paycheck

Here are a few examples of how garnishment may impact your pay based on different pay cycles:

These numbers highlight how quickly garnishment can take a toll on your ability to pay rent, cover groceries, or take care of your family.

What You Can Do To Avoid Garnishment

If you’re behind on payments or at risk of default, there are still several options available to prevent garnishment before it starts:

1- Explore an Income-Driven Repayment Plan

Go to StudentAid.gov and see if you qualify for an Income-Driven Repayment (IDR) plan. These plans adjust your monthly payment based on income and family size. Some borrowers qualify for payments as low as $0.

2- Start Loan Rehabilitation

Loan rehabilitation allows you to remove the default status by making nine on-time monthly payments agreed upon with your loan holder. This also stops garnishment.

3- Consider Consolidating Your Loans

Loan consolidation can combine defaulted federal loans into one new loan and make you eligible for IDR plans.

4- Call the Student Loan Relief Helpline

Speaking with someone can help. Call (888) 856-2668 to explore all your options, including forgiveness programs that may still be available.

5- Don’t Wait

Once your employer is contacted, the garnishment process is already underway. Acting before that happens can help you avoid workplace embarrassment and financial strain.

A Note of Encouragement

If you’re feeling overwhelmed or ashamed about being in default, please know that you’re not alone. Millions of people are in the same situation, and the federal government wants to help you resolve it. Programs exist because they know people fall behind for reasons beyond their control.

This summer doesn’t have to be overshadowed by fear or paycheck surprises. Take a little time now to put a plan in place and breathe easier when fall comes.

Visit StudentAid.gov, or call the Student Loan Relief Helpline at (888) 856-2668. There is hope, and there is help.