Some student loan borrowers brace for smaller paychecks: What to know

Student loan delinquency rate spikes post pandemic

Nearly one in three student loan borrowers are at risk of defaulting on payments as early as July. This comes as delinquency and default rates soar in the wake of pandemic-era repayment relief ending. This accounts for about 5.8 million federal student loan borrowers, who were 90 days or more past due on their payments as of April 2025. This new information comes from analysis from TransUnion. LiveNOW?s Andrew Craft is getting the latest from Fox News multimedia reporter, Caroline Elliott.

Millions of delinquent student loan borrowers are facing potential wage garnishment by the federal government soon, and most say they’ll put off credit card and personal loan payments to prevent smaller paychecks. 

According to a new survey from TransUnion credit bureau, the threat of involuntary collections by the Department of Education is causing a "potential shake-up in the traditional payment hierarchy," meaning many borrowers who are behind will have to prioritize which bills to pay – and not pay – if they don’t want their wages garnished. 

When will student loan wage garnishment begin? 

What we know:

In May, the Department of Education announced that tax refunds and wages could be withheld starting this summer if borrowers in default don’t take steps to restart payments. As of late August, the department had not yet begun involuntary collections. 

FILE - College graduates (photo by Mike Kemp/In Pictures via Getty Images)

What we don't know:

It’s still unclear exactly when wage garnishment will begin. The Department of Education did not respond to a request for comment. 

When is a student loan in default? 

Timeline:

Student loan borrowers are considered in default if they’re 270 days past due on payments. At that point, loan holders are at risk of having 15% of their pay docked by the government, with the money going toward the outstanding debt.

By the numbers:

TransUnion says as of July, some 5.4 million borrowers, or 29%, were 90 days or more behind on their payments, but it’s unclear how many are nearing the 270-day threshold that could trigger wage garnishment. 

Prioritizing student loan payments

Dig deeper:

Borrowers facing wage garnishment said they plan to pay their mortgage and auto loans first, but they’ll prioritize student loan payments ahead of credit cards and personal loans in an effort to prevent smaller paychecks. 

What they're saying:

"Many are being forced to make difficult, short-term prioritization decisions as cash flows fail to meet spending and debt obligations," Joshua Turnbull, senior vice president and head of consumer lending at TransUnion, said in a statement.

What can borrowers do?

What you can do:

There’s still time to take action. 

If you are in default, you can get your loans back into good standing by either entering a rehabilitation agreement, where you must make nine consecutive payments based on their income, or by consolidating your loans into a new federal Direct Loan.

"The most important thing borrowers can do before administrative wage garnishment restarts is to log into studentaid.gov to check whether their federal student loans are in default and take steps now to remove them from default," said Kyra Taylor, staff attorney at the National Consumer Law Center.

The Department of Education must provide 30 days notice before it sends a garnishment order to your employer. During that time, you can request a hearing to object by telling the department that the garnishment would cause you financial hardship. You can also request that the department reduce the amount being garnished and submit documentation about your income and expenses.

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To do this, you must make your hearing request in writing, postmarked no later than 30 days after the garnishment order. Your loan holder will then arrange the hearing. If you’re unsure who your loan holder is, you can contact the Education Department’s Default Resolution Group.

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If you request the hearing within 30 days of receiving the garnishment notice, the department cannot start garnishment until it issues a decision on the borrower’s hardship request. 

You can request a hearing after the 30 day period is up, but in those cases the department will generally not stop garnishing your wages while the hearing request is pending.

If you were laid off from your last job, you can also object to garnishment if you have not been in your current job for 12 consecutive months. You can further request a hearing and object if you submitted an application for certain kinds of statutory discharges and those have not yet been decided. Some common reasons for statutory discharge of student loans include: if the school you attended closed before you could complete your degree, if your school owes you a refund but fails to pay it, if you’re experiencing total disability, or if you’re experiencing bankruptcy.

You can also contact your representatives in Congress. U.S. representatives and senators have entire teams dedicated to constituent work.