Millions Face Wage Garnishment as Student Loan Freeze Ends

Starting May 5, the U.S. Education Department will resume collection on student loans that are currently in default, a shift that could impact millions of Americans. For the first time since March 2020, federal agencies will once again begin garnishing wages and seizing government payments from borrowers who have fallen behind on their student loan repayment.

This move ends a period of suspended collections that began at the onset of the COVID-19 pandemic. Since then, federal student loan payments and interest accrual have been paused, giving borrowers temporary relief. But with the official restart approaching, questions, concerns, and confusion are spreading among those who now face mounting financial pressure as student loan repayment resumes.

5.3 Million Borrowers Already in Default

As of now, approximately 5.3 million borrowers are in default on their federal student loans. Default occurs when a borrower fails to make a payment for 270 days—roughly nine months. Once in default, loans become subject to aggressive collection efforts, including wage garnishment and the withholding of tax refunds and federal benefits through the Treasury Department’s offset program.

The Education Department has confirmed that these methods will resume beginning next month. Borrowers will receive a 30-day notice before wage garnishment begins. If you are struggling with student loan repayment, it is essential to understand the consequences and plan ahead.

Return to Pre-Pandemic Collection Policies

Under the Trump administration, a moratorium on collections was put in place in March 2020 as the nation grappled with a public health crisis and economic shutdowns. The pause was extended several times by the Biden administration, but the landscape has now shifted. Officials say the time for leniency is over. With the end of the student loan repayment pause, the government is set to take action again.

“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” said Education Secretary Linda McMahon in a statement on Monday.

Rising Tension Between Advocates and Officials

Advocacy groups are pushing back. Critics argue that the abrupt resumption of collection could exacerbate financial distress for millions of working families who are already struggling with inflation, rising rents, and stagnant wages.

“This is cruel, unnecessary and will further fan the flames of economic chaos for working families across this country,” said Mike Pierce, executive director of the Student Borrower Protection Center.

The sense of instability is being compounded by years of shifting policy from two different administrations. The Biden administration tried—unsuccessfully—to implement broad student debt forgiveness. After multiple court challenges, the plans were ultimately struck down. The result: widespread confusion and uncertainty among borrowers as they look for clarity on student loan repayment options.

Grace Period Ended in Late 2024

For a time, borrowers were protected. In addition to halting collections, federal student loan payments were paused, and no interest accrued. This pause was repeatedly extended, and a final grace period expired in October 2024. That marked the return of mandatory payments for tens of millions of Americans.

Since then, many borrowers have struggled to catch up. According to the Department of Education, only 4 in 10 borrowers are current on their student loan repayment. About 4 million others are considered delinquent—behind by 91 to 180 days.

Loan Servicer Layoffs and System Strain

The transition back to repayment has been rocky. Federal Student Aid (FSA), the office responsible for managing student loans, has faced significant staffing challenges. Layoffs have limited the department’s capacity to support borrowers who are looking for assistance with student loan repayment options.

Kristin McGuire, executive director of Young Invincibles, described the result: “People who are trying to pay don’t know where to go. They call and wait hours to speak to someone. Sometimes they get no answer at all.”

The lack of communication has left many in the dark about what options exist for repayment, particularly among borrowers who qualify for income-driven repayment (IDR) plans. Student loan repayment should not be this difficult for struggling borrowers, yet many are finding themselves lost in a maze of complex policies.

IDR Plans: Blocked, Then Reinstated

Further complicating matters, several income-driven repayment plans have faced legal hurdles. These programs adjust monthly payments based on a borrower’s income and family size, offering relief to those with limited means.

In February 2025, a court decision halted some of these payment plans. Applications for IDR programs were briefly taken offline by the Education Department, leaving borrowers uncertain about their eligibility and next steps. A month later, those applications were made available again—but the disruption added to the overall confusion surrounding student loan repayment.

Borrowers enrolled in the newer SAVE plan—an initiative from the Biden administration—were placed in forbearance status. While this pause in payments might sound helpful, interest still accrued, potentially increasing long-term debt burdens, and complicating student loan repayment even further.

“Things are really difficult to understand right now. Things are changing every day,” McGuire said. “We can’t assume that people are in default because they don’t want to pay their loans. People are in default because they can’t pay their loans and because they don’t know how to pay their loans.”

The Impact of Wage Garnishment and Offset Programs

For borrowers in default, the return of collections means more than just harassing phone calls or letters. The Treasury Department’s offset program is a powerful tool. It can intercept federal tax refunds, Social Security payments, and even paychecks for federal employees, all of which can severely impact those struggling with loan repayment.

This can have a crushing effect on households living paycheck to paycheck. Unlike other forms of debt collection, the federal government does not need a court order to garnish wages or seize refunds.

The lack of recourse has left some borrowers feeling trapped. Once collections begin, it becomes significantly more difficult to rehabilitate loans or consolidate them into manageable student loan repayment plans.

What Borrowers Can Do Now

As the May 5 deadline approaches, borrowers in default or nearing default should act quickly. Some steps include:

• Check loan status: Log into your Federal Student Aid account to verify whether your loan is in default or delinquent.
• Contact servicers: While hold times may be long, it's important to reach out to your loan servicer to discuss options, including rehabilitation or consolidation.
• Explore repayment plans: Revisit eligibility for income-driven repayment plans, especially now that applications are back online.
• Watch for notices: The Department of Education is required to provide a 30-day notice before wage garnishment begins. Do not ignore this communication if you need assistance with student loan repayment.

A System in Transition

The resumption of student loan repayment collection marks a dramatic shift after years of forbearance. While the Education Department frames it as a return to fiscal discipline, critics argue the move disregards the complex financial realities many Americans are still facing.

At the heart of the issue is a fundamental question about how the nation should treat educational debt—and those who struggle to repay it. With more changes likely to come, the only constant for now is uncertainty.