Millions Could See Student Loan Payments Pulled Directly From Their Paychecks

Millions of borrowers in default could soon see money taken directly out of their paychecks as federal collections resume.

The federal government is about to restart wage garnishment for people who are behind on their federal student loans. According to CNBC, the Department of Education says it will begin notifying borrowers in default that their wages can once again be taken directly from their paychecks.

This is the first time wage garnishment has been used since student loan collections were paused during the pandemic. Borrowers who have been in default meaning they have not made payments for roughly nine months or more will be the first affected.

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Once a borrower receives a notice, the government can garnish up to 15 percent of disposable income unless the borrower takes action within the required window. CNBC reports that millions of borrowers remain in default or delinquent, putting a large group of people at risk as collections ramp back up.

The Education Department says borrowers still have options to stop garnishment, including loan rehabilitation or consolidation, but those steps must be taken before the process begins. Officials argue the move is about enforcing repayment and protecting taxpayers, while critics warn it could hit already struggling households hard.

Bottom line. The student loan pause era is officially over, and for borrowers in default, the consequences are about to become very real again, according to CNBC.