The Trump administration said that it will begin garnishing the wages of student loan borrowers who are in default early next year. The department said it will send notices to approximately 1,000 borrowers the week of January 7, with more notices to come at an increasing scale each month. That could hit Alabama college students hard, with a reported 34% behind in their college loan payments. That’s supposedly the second highest default rate in the nation.
Millions of borrowers are considered in default, meaning they are 270 days past due on their payments. The department must give borrowers 30 days notice before their wages can be garnished. The department said it will begin collection activities, "only after student and parent borrowers have been provided sufficient notice and opportunity to repay their loans."
In May, the Trump administration ended the pandemic-era pause on student loan payments, beginning to collect on defaulted debt through withholding tax refunds and other federal payments to borrowers.
The Federal Reserve Bank of New York broke down the deliquency rate for college students nationwide. Alabama’s current rate of 34% was higher than the 26% just five years ago.
The move ended a period of leniency for student loan borrowers. Payments restarted in October of 2023, but the Biden administration extended a grace period of one year. Since March 2020, no federal student loans had been referred for collection, including those in default, until the Trump administration's changes earlier this year.
The Biden administration tried multiple times to give broad forgiveness to student loans, but those efforts were eventually stopped by courts.
Persis Yu, deputy executive director for the Student Borrower Protection Center, criticized the decision to begin garnishing wages, and said the department had failed to sufficiently help borrowers find affordable payment options.
"At a time when families across the country are struggling with stagnant wages and an affordability crisis, this administration's decision to garnish wages from defaulted student loan borrowers is cruel, unnecessary, and irresponsible," Yu said in a statement. "As millions of borrowers sit on the precipice of default, this Administration is using its self-inflicted limited resources to seize borrowers' wages instead of defending borrowers' right to affordable payments.