The largest forced debt collection in U.S. history is about to begin, and millions of Americans are in the crosshairs. Starting in June 2025, the federal government will begin garnishing wages for defaulted student loan borrowers, marking the end of a five-year pause on collections. The numbers are staggering—42.7 million borrowers owe a combined $1.6 trillion, and the delinquency rate has hit an all-time high.
The Department of Education has already sent out 195,000 garnishment notices, warning borrowers that their paychecks will soon be docked. The Treasury Offset Program, which allows the government to seize tax refunds and federal benefits, is also back in full force. Borrowers who are 90 days or more past due now make up one in five of all student loan holders, the highest rate ever recorded.
Colleges are being pressured to track down their former students. Institutions that fail to assist in locating delinquent borrowers could face cuts to federal funding, adding another layer of urgency to the crackdown. The government is making it clear—either schools help recover the debt, or they risk losing financial support.
The economic fallout will be severe. Employers are bracing for the impact as workers suddenly find their paychecks reduced. Financial wellness programs have no clear strategy to help employees navigate the crisis. Pair this with record-high credit card debt and a weakening job market, and the situation looks increasingly dire.
SOURCES:
https://www.marca.com/en/lifestyle/us-news/personal-finance/2025/05/07/681b80b8e2704eb8ab8b457d.html
