Student Borrowers Risk Having Their Wages Garnished Over Loans

Millions of student borrowers could begin having their wages garnished as soon as this summer, according to estimates from credit bureau TransUnion, Cora Lewis reported for the Associated Press (AP).

By August, roughly 3 million borrowers could fall into default.

TransUnion predicts that by August, roughly 3 million borrowers could fall into default—meaning they are at least 270 days past due on payments.

Once in default, borrowers are at risk of having up to 15% of their pay withheld by the government to repay outstanding debt. As of now, no clear timeline has been announced for when wage garnishments will begin.

Following the end of the pandemic-era pause on student loan payments in May, borrowers have had to reassess their loan obligations and household budgets. Another 2 million borrowers are projected to default in September.

A Biden-era grace period—during which late or missed payments didn’t affect borrowers' credit scores—ended last fall. Since then, millions have seen their credit ratings decline.