Millions of federal student loan borrowers are at risk of defaulting this summer, which could lead to wage garnishment and seized tax refunds if they don’t act soon.

Roughly 3 million borrowers could fall into default by August, with another 2 million on track by September, according to credit bureau TransUnion. After the pandemic-era pause on student loan payments ended, many borrowers have struggled to adjust. Complicating matters, long call wait times and dropped connections—driven partly by staffing cuts at the Education Department—have made it harder for borrowers to get help.

What Happens When Loans Go Into Default?

Federal student loans enter default when a payment is 270 days overdue. Once in default, borrowers face wage garnishment of up to 15% of their pay, withheld directly by the government to repay the debt. The Department of Education has already started sending out warnings about possible collections.

It’s still unclear exactly when wage garnishment will begin, but borrowers are urged to act quickly.

Why Are Defaults Increasing?

The spike in defaults follows the end of a temporary grace period from the Biden administration, during which missed payments didn’t hurt borrowers’ credit. That ended last fall. In May, the Trump-era policy to resume collections for defaulted borrowers officially took effect.

What Can You Do If You’re at Risk?

There are still steps borrowers can take to avoid garnishment: “The most important thing borrowers can do before administrative wage garnishment restarts is log into studentaid.gov to check whether their federal student loans are in default and take steps now to remove them,” said Kyra Taylor of the National Consumer Law Center.

If your loans are in default, you have two main options to return them to good standing:

• Loan rehabilitation: Make nine monthly payments based on your income.
• Loan consolidation: Combine defaulted loans into a new federal Direct Loan.

The Education Department is required to send a 30-day notice before initiating garnishment. During that time, you can:

• Request a hearing to contest the garnishment based on financial hardship.
• Request a reduction in the garnished amount by submitting proof of income and expenses.

Hearing requests must be submitted in writing and postmarked within 30 days of the notice. If you meet the deadline, garnishment will be paused while your case is reviewed. Late requests can still be submitted, but wage garnishment will usually continue while your request is pending.

Other Grounds to Challenge Garnishment

You may also object if:

• You were laid off and haven’t held your current job for 12 straight months.
• You’ve applied for certain types of loan discharges—such as for school closure, total disability, or bankruptcy—and your application is still under review.

Still Need Help?

You can contact the Default Resolution Group to find out who your loan holder is and how to proceed. Additionally, your local congressional office can offer support through their constituent services teams.

Taking action now can help you avoid serious financial consequences.

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