On Wednesday, January 7, the Department of Education will begin sending wage garnishment notices to approximately 1,000 students who are in default on their loans, meaning they are more than 270 days behind on payments.
The federal office indicated that this will be the beginning of the notices, which will increase each month.
The resumption of this policy by the federal government would mark the end of a suspension of five years of collection activities and would represent a significant change in federal student loan policy.
A little context
The placement of wage garnishments for federal student loans is not new; however, it is a measure that had been suspended in 2020, at the beginning of the Covid-19 pandemic, when the federal government decided to stop all collection activity as part of the relief measures during the health emergency.
Now, the government is resuming the measure after remaining inactive for five years.
What does the federal law say?
Under federal law, the Department of Education can sue borrowers who default on their payments without resorting to litigation. The agency sends a 30 days' notice is given, and if after that period the amount owed is not paid, wage garnishment may be initiated.
In addition to placing wage garnishments, federal law also states that the government can confiscate borrowers' federal tax refunds and even withhold Social Security retirement and disability benefits to recover defaulted student loan debt.
Who would be affected by the measure?
Approximately 5,5 million borrowers are currently in default, according to a report from the American Enterprise Institute (AEI).
The report also indicates that 3,6 million borrowers are more than 270 days behind on their payments and 2,7 million are in the early stages of delinquency, also placing them in a risk category of receiving wage garnishment notices.
According to NPRThe resumption of the embargo could mean losing up to 15% of disposable income for affected borrowers.
Related>>> Step by step: how to request the most convenient student loan payment plan
How to avoid wage garnishment?
Any borrower with overdue debts who wishes to avoid wage garnishment must pay the amount owed to bring their account up to date.
For more information on how to get out of default, visit the website of Federal Student Aid (FSA).
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