Name: Wages of student loan borrowers in default may be garnished
Uploaded: 2026-01-09T15:21:28.731Z
Duration: 2 min 45 s
Description: The Department of Education is sending out wage garnishment notices this week that could impact millions of student loan borrowers who have defaulted. CBS News business analyst Jill Schlesinger explains who is affected and what to do if you receive a notice.

The Department of Education is sending out wage garnishment notices this week that could impact millions of student loan borrowers who have defaulted. CBS News business analyst Jill Schlesinger explains who is affected and what to do if you receive a notice.

Washington

The Department of Education has begun notifying millions of federal student loan borrowers in default that their wages may be garnished as part of resumed collection efforts. Borrowers who have not made payments for over 270 days are considered in default and may also have their tax refunds or Social Security benefits seized.

Officials advise affected borrowers to contact their loan providers to explore options such as refinancing or enrolling in income-based repayment plans. Making consistent payments can help borrowers return to good standing, and ignoring government notices may result in more aggressive collection actions.

Wages of student loan borrowers in default may be garnished

In today's Money Watch, we are talking about student loans. As of September, more than 45 million Americans held outstanding student loans, totaling $1.67 trillion. This week, the Department of Education is sending out notices that could impact millions who have defaulted. CBS News Business Analyst Jill Schlesinger is here to break it all down. Good morning. Good morning. All right, so when does a student loan borrow in default, and then what is the government doing to recoup those loans? Okay, we're talking about 5.3 million federal student loan borrowers. Right. It's a real number, okay? Okay. And what they are doing is when you look at the, there are sort of three stages of student loan problems. Okay. The first is if you miss all payment, literally just one, you're considered delinquent. The second phase is you've not paid for 90 days. Now the government's going to go to their credit reporting agencies and say, hey, Nate's a bad dude. He didn't pay us for 90 days. That's going to ding your credit score. Okay. So you go from delinquent to getting that ding. To that ding. Yep. Now you're more than 270 days without a payment. You are officially in default, and that is a bad place. So those are the three phases. Those are the three phases, and now what the government is doing is they're saying, hey, you owe us a bunch of money, Nate. We're going to take some money back from you. How? We are going to garnish your wages up to 15, 1.5% of your wages. So that's the notification you'll get. You're going to, they're going to say, we're going to take some money back from you. We want you to repay the loan. Number one. Number two, they could take a chunk of your tax return. Like if you are due a refund, they're going to take a piece of your refund. Pull it out of that. Exactly. Third thing, they could actually take a piece of your social security if you're an older American and receiving benefits. So what do you do? Okay. So now there's a way to correct this. If you make nine out of 10 payments going forward, you're going to get on the pathway. This is a good thing because realistically, if you can just start up, that's going to be great. You can either refinance the loan or you can go into something called an income based repayment plan, which is based on how much money you make. No matter what gang, please do not ice out the government. They are going to come after you and they are going to get more aggressive. This is something that always happened by the way, before we had COVID, before the Biden administration gave everybody a little bit of breathing room. This always was a problem, but now they're restarting something that had happened prior to COVID. The rules are back to where they were. You have to pay your loan. If you're not paying your loan back, then of course, what we know is you've got to go to your student loan provider, get some options, and please, again, don't go cold on the government. So try to stay on top of it. If you fall off the path, just make steps to get back on the path of repayment. Exactly. Jill, I appreciate you as always. Of course.

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