Student loan defaulters could see wages, benefits seized starting November

The Trump administration is preparing to pursue the wages and benefits of federal student loan borrowers in default, with private debt collection agencies potentially beginning work as soon as November.

The Education Department is working with the Treasury Department to hire collectors targeting nearly 10 million Americans in default.

Under the plan, borrowers can face administrative wage garnishment of up to 15% of earnings without a court order, while the government could intercept federal tax refunds and offset up to 15% of certain benefits such as Social Security.

Borrowers are supposed to receive written notice and an opportunity to pursue discharge, rehabilitation, or consolidation.

The Treasury assumed responsibility for the government’s $1.7 trillion student loan portfolio from the Education Department in late September. The more aggressive collection measures are unlikely to be announced before next month’s midterms, with one saying it “would be politically insane to do this before the midterms.”

Critics condemned the plan. The Roosevelt Institute said the administration is “once again throwing the rulebook at low-income Americans while letting grift and corruption fly for the well-connected.”

Supporters argue collections must resume. The Committee for a Responsible Federal Budget’s March Goldwein said postponing collections cost taxpayers an estimated $5 billion, adding: “We shouldn’t be cancelling student debt for people who just don’t want to pay.”