Beginning January 7th, the federal government will resume wage garnishments for individuals who have defaulted on student loan payments. Wage garnishment is court-ordered withholding of money your employer would otherwise pay to you. It is then sent to the entity to whom you owe a debt. This is only done after you have failed to make payment for a certain amount of time, meaning you have become delinquent and defaulted on the loan or other financial obligation. This process can occur on missed payments related to taxes, child support, medical care, and federal student loans.
The federal government has not garnished any wages related to student loans since the COVID-19 pandemic. The Trump administration has decided it is time to restart this process. Next week, the Department of Education will send the first set of notices to borrowers who are at least 270 days past due on their payments. The government is required to give borrowers at least 30 days notice prior to starting the garnishment process. This allows borrowers to appeal the decision, renegotiate payment of the student loan, enter a rehabilitation agreement, or request a hearing to prove the garnishment will create financial hardship.
If the wage garnishment is approved, the most the federal government can take from an individual’s paycheck is 25% of a person’s earnings after mandatory deductions or the amount by which the earnings exceed 30 times the federal minimum hourly wage, whichever is less. States can impose stricter limits, meaning the federal government cannot take as much each pay period, but the State of Arkansas mostly follows federal guidelines.
Critics of the decision to garnish wages for repayment of student loans state it will add additional strain to those Americans who are already struggling in the current harsh economic climate. With wages stagnant and prices of basic goods rising, those who are having difficulty making ends meet will have an increased inability to pay for housing, food, and other necessities. In turn, this will add more burdens to the social programs that serve as a safety net for those individuals and families who are already falling behind on basic living expenses.
