After a five-year pause, federal student loan wage garnishments are back, and millions of borrowers face sweeping changes to their repayment options in 2026.
The Department of Education began sending wage garnishment notices this month, the first step in a process that could automatically deduct 15% of borrowers' paychecks. So far, 1,000 notices have been sent to borrowers in default, representing just a fraction of the more than 5 million borrowers who have defaulted on their federal student loans.
"15% is a giant hit to one's income, especially when right now every dollar counts towards family expenses and saving for the future, which is also important to keep at the forefront," said Lauren Wybar, a certified financial planner and senior wealth executive at Vanguard.
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The wage garnishment notices are being mailed to borrowers' last known addresses, and officials worry many won't receive them. Missing the notice doesn't protect borrowers from paycheck withholding or other seizures.
"It is much easier for the Department of Education to seize your tax refund than it is to track down your employer and put a garnishment order in place," Abby Shafroth, managing director of advocacy at the National Consumer Law Center, said.
Shafroth urges people to check if their tax refund is at risk before filing by calling the Treasury Offset Program Hotline to see if they've been flagged and potentially resolve issues to keep their refund.
The timing of the garnishments coincides with a quicker-than-expected end to the Saving on a Valuable Education, or SAVE, repayment plan. A recent court settlement means the 7 million borrowers enrolled will see the plan evaporate well before its July 2028 expiration date set in the One Big Beautiful Bill Act.
"For borrowers who are in the SAVE plan, who haven't had to make payments for the last year and a half, they're going to start getting student loan bills probably very soon. And those bills are almost certainly going to be higher than the bills they received when they were enrolled in the SAVE plan," Shafroth said.
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The SAVE plan had the most generous formula for borrowers in determining income-based payments.
Three payment options will remain for current borrowers: the Income-Based Repayment (IBR), the Income-Contingent Repayment (ICR) and the Pay As You Earn plan (PAYE). These plans adjust monthly payments based on income and family size.
"The income-based repayment plan is probably the most important because that's the plan that's going to survive, even after a bunch of additional changes to the student loan system start going into effect starting this summer and over the next few years," Shafroth said.
Income-Contingent Repayment (ICR) and the Pay As You Earn plan (PAYE) have a planned phase-out date in July 2028, but borrowers can still apply for the plans before July of this year.
Borrowers consolidating loans or taking out new loans after July of this year will face even more limited repayment options, as they'll be subject to new rules under recent legislation. This means if loans are taken out, or consolidated, for graduate school or to help a child pay for college, all the loans in your portfolio will be considered "new."
If you're struggling with federal student loans, don't ignore them. Use StudentAid.gov's loan simulator to explore income-driven repayment plans. You can also apply for a forbearance or forgiveness program. If you've received a garnishment notice, you have 30 days to respond.
With tax season approaching, there's another important change: student loans forgiven in 2026 will be taxed. This won't affect your 2025 taxes due in April, but borrowers should set money aside to prepare for a potentially large tax bill next year.
"I think the key advice for borrowers is, the ground is moving underneath you and we're going keep seeing changes," Shafroth said.
