Federal Student Loan Wage Garnishment Resumes January 2026

After five years of pandemic-era protections and a year of “on-ramp” transitions, the Department of Education is reactivating wage garnishment for millions of defaulted borrowers this January.

The U.S. Department of Education’s resumption of Administrative Wage Garnishment for federal student loans is slated to begin in January 2026.

While the Treasury Offset Program (which seizes tax refunds and Social Security benefits) was reactivated on May 5, 2025, wage garnishment required a longer notice period. Throughout the summer and fall of 2025, the Department of Education sent out mandatory 30-day notices to approximately 5.3 million defaulted borrowers.

According to Newsweek, the Department of Education will now notify about 1,000 borrowers in default that some of their pay will be used to cover their past-due student loans starting the week of Jan. 7, 2026.

Borrowers who did not enter a rehabilitation program or a “legally compliant” repayment plan — like the new Repayment Assistance Plan established by the One Big Beautiful Bill Act (OBBBA) — by the end of 2025 will see up to 15% of their disposable pay garnished starting in the first quarter of 2026.

The OBBBA includes student loan reforms projected to reduce federal spending by $320 billion over the next decade through loan collections and the elimination of various forgiveness programs.

The OBBBA’s repeal of the Saving on a Valuable Education (SAVE) Plan and the introduction of the Repayment Assistance Plan, effective July 1, 2026, means millions of borrowers will be transitioned out of non-compliant plans and into active repayment or default resolution.

The SAVE Plan also faces changes after the Department of Education reached a proposed settlement agreement with the state of Missouri (PDF) to end the plan for federal student loan forgiveness, following its block in the district and appeals courts.

If approved by the court, new borrowers will not be enrolled in the SAVE Plan, pending applications will be denied, and all current borrowers in the SAVE Plan will be moved to different repayment plans, ACA International previously reported.

This news comes as the student loan landscape faces a surge in overdue payments following the end of the COVID-19 pause, ACA previously reported on the SAVE Plan. A report from the JPMorgan Chase Institute suggests that the rise in delinquency rates above pre-pandemic levels is not primarily driven by financial hardship, but instead by administrative issues and confusion.

In fact, overdue borrowers today are generally in a better financial position than those in 2019, the report found, requiring a smaller share of their discretionary income for payments and showing fewer delinquencies on other debts. Instead, the delinquency uptick seems to be largely driven by administrative issues, miscommunication, and a surprisingly high rate of “never payers,” the report found.

According to the Newsweek report, before initiating wage garnishment, department officials “must identify and verify a borrower’s employer, a multistep process that can slow implementation.”

This must occur at least 30 days before garnishment occurs. Borrowers may request a hearing, pay their debt in full, or agree to alternative repayment plans, according to the article.

The Higher Education Act permits the Department of Education to withhold up to 15% of a borrower’s after-tax income until their loan payments are settled or they are no longer in default.

How Can Servicers Help?

Student loan servicers are encouraged to communicate with borrowers in default who they had been in touch with before or during the payment pauses.

Place your contact information on your website, as along with details about the payment start process.

For borrowers with questions, the FSA website has resources that can align with your repayment strategies on behalf of clients. ACA’s Know My Debt financial literacy website also has resources.

More information: StudentAid.gov/end-default.

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