Your paychecks could shrink as student loan wage garnishment resumes soon - here’s how borrowers can prepare

Student loan paycheck deductions: For millions of Americans struggling with defaulted student loans, a looming reality is coming into sharper focus, the federal government is preparing to resume wage garnishments after a nearly five-year pause since the pandemic, as per a report. But with summer drawing to a close and Labor Day just around the corner, many borrowers are still waiting in limbo, unsure when exactly their paychecks could start shrinking, according to a NBC News report.

When Will Student Loan Wage Garnishments Resume?

When the Trump administration first announced in April that student loan collection efforts would resume, it said that wage garnishments would return “later this summer,” according to the report. Now, with no specific date announced and silence from the Education Department on the timeline, uncertainty is growing.

Executive director of the Student Loan Servicing Alliance, Scott Buchanan, pointed out that “Getting these programs set back up takes time,” adding, “I would expect at least a month or more” before garnishment begins, as quoted by NBC News.

The stakes are high for borrowers as their paychecks are at risk again. As of May, over 5.3 million student loan borrowers are in default, putting their income at risk, according to the report.

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How Much of Your Paycheck Can Be Garnished for Student Loans?

Higher education expert Mark Kantrowitz highlighted that once the process restarts, the US Department of Education can take up to 15% of a borrower’s disposable income, which is the money left after taxes, as reported by NBC News.

Minimum Income Protections for Borrowers Explained

However, borrowers won’t be left penniless, as Kantrowitz pointed out that by law, at least $217.50 per week, which is the equivalent of 30 times the federal minimum hourly wage ($7.25) a week, must be protected, according to the report.

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Are Freelancers and 1099 Workers Affected by Garnishment?

He also explained that it is more difficult for the federal government to garnish the wages of someone who receives 1099 income, which is income from self-employment, freelance work, investment, or other non-employee sources, as defined by H&R Block. Kantrowitz said, “If there is no employer, wage garnishment can’t happen,” as quoted by NBC News.

What to Expect in a 30-Day Wage Garnishment Notice

Experts have pointed out that defaulted borrowers are expected to receive a 30-day notice before their wages are garnished, according to the report.

Kantrowitz revealed a few steps to take during the notice period, which include that a defaulter will have the option to have a hearing before an administrative law judge and the Education Department notice is supposed to include information on how to request that, as reported by NBC News.

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Can You Challenge Student Loan Wage Garnishment?

He said that the defaulters' wages can also be protected if they have recently been unemployed or filed for bankruptcy, as per the report. Kantrowitz added that borrowers can also challenge the wage garnishment if it will result in financial hardship, according to the NBC News report.

Know Your Rights: Employers Can’t Fire You Over Garnishment

Apart from student loans, companies can also be asked to withhold a portion of their employees’ wages for child support, alimony and unpaid taxes, however, Kantrowitz said that, "your boss is not allowed to terminate you because of the wage garnishment," as quoted in the report.

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Steps You Can Take Now to Avoid Losing Part of Your Paycheck

Meanwhile, Buchanan advises borrowers not to wait to take action until wage garnishment begins, as per the report. Buchanan said, “Once garnishment begins there will be a flood of calls, and processing times for rehabilitations could be much longer depending on volume,” adding, “Use the next month or so to call the Default Resolution Group and discuss your options to avert garnishment,” as quoted by NBC News.

FAQs

When will wage garnishment start?
There’s no official date yet, but it's expected “later this summer.” Experts say it could still take a few more weeks.

Will I get a warning before they garnish my wages?
Yes, you must receive a 30-day notice before garnishment begins.