New Student Loan Wage Garnishments Start January 2026: What You Need to Know

A significant financial shift is arriving in January 2026. For the millions of Americans with federal student loans, the era of pandemic-related leniency has officially concluded, replaced by a new landscape of strict enforcement and structural reform including wage garnishment.

Following a series of announcements from the Trump Administration in late 2025, the federal government is pivoting from passive collection to active enforcement. For defaulted student loan borrowers, this now includes Administrative Wage Garnishment (AWG).

The Scale of the Debt Crisis

To understand the current situation, we have to look at how we got here. Currently, over 42 million Americans hold a combined student loan debt of roughly $1.6 trillion. Some borrowers are current college students or recent grads, while others might still be paying on loans that they took out 20 or more years ago. For many borrowers, their debt was “frozen” due to actions taken resulting from the pandemic:

Pandemic Forbearance

Both the Trump and Biden Administrations utilized emergency powers during the COVID-19 pandemic to pause payments, providing a safety net that lasted years.

The Return to Repayment

While the Biden Administration lifted the pause, they implemented a temporary “on-ramp” or grace period to help borrowers adjust.

Resumption of Collection Activity in 2025

In August 2025, the Trump Administration announced that the “grace period” was over. They clarified that any borrower delayed in making payments would now be subject to full collections and—crucially—negative credit reporting.

This policy shift culminated in the December 2025 announcement: Wage garnishments will begin in January 2026.

Student Debt Wage Garnishment for Defaulted Borrowers

Administrative Wage Garnishment (AWG) is a powerful tool. Unlike private creditors, the Department of Education does not need a court order to garnish your wages.

The Process and Scale

Initially, a smaller number of defaulted borrowers will receive notification that their wages will be garnished, but that number will increase quickly.

The First Wave

The Department confirmed it will send the first round of notices to approximately 1,000 borrowers during the week of January 7, 2026.

The Escalation

This is just the beginning. The Administration plans to scale these notices up monthly throughout the year, eventually targeting millions of borrowers currently in default.

The 15% Rule

By law, the government can order your employer to withhold up to 15% of your after-tax earnings. Given that so many people live paycheck-to-paycheck, garnishing 15% of their wages will result in a significant adverse impact – and the amount garnished might even be more than what the borrower would normally need to pay for their minimum loan payment. As such, it is imperative that all borrowers who are in default or who are at risk of defaulting contact their loan servicer to attempt to work out a payment arrangement BEFORE garnishment begins. 

The Notification Timeline

You won’t wake up to a smaller paycheck without warning. The Department must send a written notice to your last known address at least 30 days before garnishment begins. This notice will:

• State the amount of the debt.
• Explain your rights to inspect records and enter a voluntary repayment agreement.
• Provide instructions on how to request a hearing if you believe the debt is not owed or that garnishment would cause “extreme financial hardship.”

Who Is Your Loan Servicer?

One of the biggest hurdles for borrowers is that the company you originally borrowed from is often not the company managing your loan today.

Why Servicers Change

Over the last few years, major contracts have shifted. Companies like Navient and others have exited the federal student loan space, and millions of accounts have been transferred to new servicers like MOHELA, Nelnet, EdFinancial, or Maximus.

How to Find Your Servicer

If you aren’t sure who manages your loan, do not guess. Use one of the methods below to find out who your loan servicer(s) are. Be aware that many borrowers have more than one student loan, and they may be held by different loan servicers.

Log in to StudentAid.gov

This is the “source of truth.” Your dashboard will list every federal loan you have and the specific company assigned to service it.

Call 1-800-4-FED-AID

If you can’t get online, the Federal Student Aid Information Center can tell you who your loan servicer(s) are and how to contact them.

Access Your Student Loan Portal Accounts

Once you know who your loan servicer(s) are, visit the website corresponding to each loan servicer, and setup your portal account so you can view your loan details.

Update Your Contact Information

Make sure you input your most up-to-date contact information, including your mailing address, email address, and phone number.

Select or Change Your Repayment Plan

Next, review your loan payment options. Select or change to a payment plan that works best for you. If you aren’t sure which payment plan to go with, OR if you feel you are unable to financially manage making payments, call the loan servicer’s phone number to ask for assistance.

Already in Default or At Risk for Default

If you are already in default on any of your loans or are not yet in default but are late in making your payments, call your loan servicer immediately. Even though it might feel scary to make that call, remember that your loan servicer wants to help you to get back on track. They will discuss the options available to you, and hopefully you’ll be able to avoid wage garnishment and also begin making positive progress on paying down your debt.

The Critical Importance of Contact Info

If your servicer has an outdated address for you, then you will not receive the 30-day garnishment notice. Under the law, the Department only has to prove they sent the notice to your last known address—not that you actually opened it.

Proactive Steps for Defaulted Borrowers

If you are in default (270+ days past due), you are in the “red zone.” Here is what you must do now:

Fresh Start Program

Check if you are still eligible for “Fresh Start” initiatives that allow you to move your loans back into “In Good Standing” status quickly.

Loan Consolidation

You may be able to consolidate your defaulted loans into a new Direct Consolidation Loan, which creates a “clean slate” and allows you to enter an Income-Based Repayment (IBR) plan. Loan consolidation also will make it easier to stay on track with payments since you’ll have just one loan payment each month vs. multiple payments if you have multiple student loans. 

Voluntary Repayment

Negotiating a voluntary payment plan before the 30-day notice expires is the most effective way to block a garnishment order from reaching your employer.

Who is NOT Subject to Wage Garnishment?

Garnishment is the final step of a long default process. You are safe from this specific collection tool if:

Current Students

You are currently enrolled in college and in an “in-school” deferment status. To qualify for an in-school deferment, you must be enrolled in at least half-time status in a college or trade school that is eligible for federal financial aid.

If you meet these requirements, then your loan servicer should have automatically paused your loan payments.

In the event that you qualify for an in-school deferment but you have not received your automatic deferment, update your enrollment information through StudentAid.gov. In addition, ask your school’s financial aid office to report your enrollment status to StudentAid.gov as well to ensure that your loans will be placed into deferment.

Approved Deferment/Forbearance

You have a formal agreement with your servicer that you are approved for a deferment or forbearance for a different reason than being a current student. For example, you might have been approved for a deferment or forbearance resulting from unemployment, financial hardship, or military service.

On-Time Payers

You are making at least the minimum monthly payment on your loans already.

Non-Borrowers

You have never taken out a federal student loan.

Avoiding the Debt Trap: The Path to Debt-Free College

The most effective way to handle a $1.6 trillion problem is to ensure you aren’t adding to it!

Maximize Debt-Free Sources

Before taking a single dollar in loans, exhaust these options:

Grants

Federal Pell Grants and state-specific grants are essentially “free money” based on financial need. Apply for them with the Free Application for Federal Student Aid (FAFSA).

Scholarships

This is the most underutilized resource. The ScholarshipOwl platform makes this process manageable by using AI to match you with thousands of scholarships you actually qualify for, enabling you to apply for scholarships that are best-fit for you. The platform’s technology tools help you to prioritize the scholarships you’ll have a better chance of winning, and enable you to complete the entire application process all in one place. Not yet a member of ScholarshipOwl? Get started with a free 7-day trial!

Income & Savings

Utilizing income from a part-time job as well as assistance from family can bridge the gap between “almost covered” and “fully paid.”

The “2+2” Strategy

Start at a community college for your first two years. You’ll receive the exact same general education credits for a fraction of the price, then transfer to a four-year university to complete your bachelor’s degree.

Take Advantage of Early College Credits

While in high school, if you earned early college credit through AP exams, IB credits, and/or dual enrollment credits, make sure you transfer those credits to the college you are attending. Early college credits add up, and can help you shorten the amount of time you’ll need to spend at a university!

The 2026 Student Loan Readiness Checklist

Use this checklist to audit your accounts and ensure you are protected before the new wage garnishment rules take full effect in January 2026.

The “Source of Truth” Audit

Before you can fix a problem, you need to see the full picture.

[ ] Verify your FSA ID: Log in to StudentAid.gov. If you haven’t logged in recently, you may need to reset your password or update your two-factor authentication.

[ ] Identify your current servicer(s): Look at the “My Loan Servicers” section on your dashboard. Note that this may have changed since the last time you made a payment.

[ ] Check for “Default” status: Review each loan. If any are marked “Defaulted” or are more than 270 days past due, you are in the high-risk category for the January 2026 garnishments.

[ ] Confirm your “Loan Holder”: Defaulted loans are often transferred from a servicer (like Nelnet) to the Default Resolution Group or a collection agency. Identify who currently “owns” the debt.

Communication & Contact Update

The law only requires the government to send a notice to your last known address. If that address is old, you lose your 30-day window to object.

[ ] Update StudentAid.gov: Ensure your address, phone number, and primary email are current.

[ ] Update your Servicer Portal: Log in to your specific servicer’s website (e.g., MOHELA, Aidvantage) and mirror the updated contact info there.

[ ] Check your “Paperless” settings: Ensure you are receiving notifications in a way you actually check (email vs. physical mail).

Financial Document Gathering

If you need to negotiate a payment plan or prove “financial hardship” to stop a garnishment, you will need these documents ready:

[ ] Tax Returns: Have your 2024 and 2025 federal tax returns (Form 1040) available.

[ ] Recent Pay Stubs: Collect your last two pay stubs to calculate your “disposable income.”

[ ] Monthly Expense Records: If you plan to claim extreme hardship, keep a record of essential costs (rent/mortgage, utilities, food, and medical expenses).

Proactive Protection

Don’t wait until you receive a wage garnishment notification. Take steps NOW to protect your loan status.

[ ] Research the “Fresh Start” Program: If your loans are in default, check your eligibility to move them back to “In Good Standing.”

[ ] Evaluate Repayment Plans: Use the Loan Simulator on StudentAid.gov to find the lowest monthly payment you qualify for under current laws.

[ ] Apply for Debt-Free Funding: If you are still in school or planning to return, check your ScholarshipOwl matches to reduce the need for future loans.

Frequently Asked Questions (FAQ)

When exactly does wage garnishment start?

The Department of Education has confirmed that the first wave of notices will be sent the week of January 7, 2026. Because the law requires a 30-day warning period, the actual withholding of pay is expected to begin for that first group in February 2026.

How do I know if I am “in default”?

For federal student loans, you are officially in default if you have not made a payment for at least 270 days. If you are only a few months behind, you are considered “delinquent” but not yet in default—meaning you still have time to enroll in a repayment plan and avoid garnishment entirely.

How much money can they actually take?

Under Administrative Wage Garnishment (AWG), the government can take up to 15% of your after-tax pay. However, there are protections in place: they cannot garnish an amount that leaves you with less than 30 times the federal minimum wage ($7.25/hour) per week, which totals $217.50 per week.

Can I delay or stop a garnishment once I get the 30-day notice?

Possibly. You may be able to delay or stop the process by following one or more of the steps below:

Negotiating a voluntary repayment agreement

Call your loan servicer immediately and try to negotiate a voluntary repayment agreement. If you are successful and negotiating this, you’ll ALSO need to make your first payment within the 30-day window that began on the date of your garnishment notice. If you do not make your first payment within that window, your voluntary repayment agreement that you negotiated will not be valid, and wage garnishment will proceed.

Rehabilitating or Consolidating 

Moving your loan out of default status will halt the garnishment order. Call your loan servicer to discuss options for loan rehabilitation or loan consolidation.

My loan servicer changed. Who do I talk to?

Many loans were transferred in 2024 and 2025. If you are in default, your loan might be held by the Default Resolution Group rather than a standard servicer like Nelnet or MOHELA. Log in to StudentAid.gov to see exactly who holds your debt and who you need to call.

Will this affect my credit score?

Yes. As of August 2025, the “grace period” for credit reporting ended. Defaulted loans and late loan payments are now reported to the major credit bureaus, which can significantly lower your credit score and make it harder to rent an apartment, get a car loan, get a mortgage, etc. Protecting your credit is one of several important reasons why borrowers should prioritize making their student loan payments on time.

Be a Proactive and Responsible Borrower

The 2026 landscape is focused on accountability and enforcement. While the news of wage garnishments is stressful, the best defense is a proactive offense. By confirming your servicer, updating your contact information, and exploring repayment plans like the IBR (Income-Based Repayment), you can keep control of your finances.