Millions of student loan borrowers could be facing wage garnishment by the end of August with collections starting within weeks, according to a report from credit bureau TransUnion.
The report estimates one million borrowers could reach default status in August, adding to the nearly 2 million accounts previously estimated to default as of July. Loans are generally placed in default when they are more than 270 days, or about 9 months, past due. TransUnion’s report projects another two million could default in September.
Although the Trump administration announced that the U.S. Department of Education would start collecting payments for defaulted federal student loans on May 5, the exact timeline for when wage garnishments may begin is unclear. The Department announced on July 9 that it has not yet garnished wages or federal benefits, including Social Security payments, since resuming collections but expects wage garnishment to begin “later this summer.”
Student loan news: As millions miss student loan payments, here’s how it could hurt the economy
The agency, led by Education Secretary Linda McMahon, said in the July release that it has emailed more than 23 million borrowers “reminding them of their legal obligation to repay their loans” and hads collected more than $280 million on defaulted student loans as of late June through voluntary means and other programs.
The garnishment, in which the government can order employers to withhold up to 15% of wages to collect on defaulted debt, can continue until defaulted loans are either paid in full or removed from default, according to the department. The threat of garnishment comes amid a series of aggressive overhauls of federal student loans by President Donald Trump’s administration.
The department restarted interest accrual Aug. 1 for borrowers enrolled in a Biden-era repayment program designed to ease monthly payments, while Trump’s massive budget and spending bill signed July 4 will bring a series of other updates and changes, including lifetime borrowing caps and an end to several loan-forgiveness and repayment-plan programs.
More: Keep up on the latest in education, student loan news from USA TODAY
Other than paying the balance in full, federal education officials said those wanting to avoid wage garnishment can pursue negotiations with them or the private collection agency or request a hearing. Negotiation and hearing requests must be made within 30 days of a notice of intent to garnish, which all borrowers have a right to receive, according to the Education Department’s website.
Once garnishment is underway, borrowers can request a hearing as well, or may be eligible to enter into a rehabilitation agreement, which could suspend garnishments once a certain number of consecutive, on-time payments are made. More information on collections is available at studentaid.gov.
Approximately 42.7 million borrowers owe more than $1.6 trillion in student debt, and over 5 million borrowers are in default, the department said in April.
Kathryn Palmer is a national trending news reporter for USA TODAY. You can reach her at kapalmer@usatoday.com and on X @KathrynPlmr.
This article originally appeared on USA TODAY: Will student loan wage garnishment begin this summer?
