NEW YORK – As early as summer, millions of student borrowers may begin experiencing wage garnishment, according to credit bureau TransUnion’s projections.

The bureau estimates that by August, around 3 million borrowers could default, meaning they are over 270 days late on payments. At this stage, loan holders face a potential 15% reduction in their wages by the government, directed towards settling their debt. However, the exact timing for wage garnishment to commence remains unclear.

Following the end of the pandemic-related suspension of student loan payments in May, borrowers have had to reevaluate their financial situation and the status of their loans. TransUnion anticipates an additional 2 million borrowers could enter default by September.

A Biden-administration grace period, during which late or missed payments were not counted against credit scores, ended in the fall.

Since then, millions of borrowers have seen hits to their credit ratings.

Here’s what to know:

What you can do to prepare

“The crucial step borrowers need to take before wage garnishment resumes is logging into studentaid.gov to determine if their federal student loans are in default and to take necessary action to rectify this,” stated Kyra Taylor, an attorney at the National Consumer Law Center.

Taylor explained that borrowers often aren’t aware their loans have defaulted. This is especially true if they pursued education at different times or have various types of federal loans, leading to multiple loan servicers.

In such situations, it’s advisable to act promptly to return loans to good standing either through a rehabilitation agreement, requiring nine consecutive income-based payments, or by consolidating the loans into a new federal Direct Loan.

“Because this hasn’t happened for so long, there are many people who have no idea they’re at risk,” said Aissa Canchola Bañez, policy director at the Student Borrower Protection Center.

Wait times for student borrowers attempting to contact their loan servicers have been long, with many dropped calls, in part due to layoffs at the Education Department. Bañez recommends contacting your congressperson, using a casework tool that can guide you through submitting a constituent request.

“These offices have entire teams dedicated to constituent casework for when you have an issue with a federal agency, such as the Department of Education,” she said. “So you can request assistance from your member of congress — your representative or senator.”

What happens if you remain in default

Until past due payments are paid or the loan’s default status is resolved, borrowers are at risk of having up to 15% of their wages deducted directly from their paychecks.

The Department of Education has sent notices to borrowers warning that tax refunds and wages could be withheld starting this summer if borrowers don’t take steps to restart payments. The department hasn’t yet provided additional information on timing.

Richelle Brooks, 37, an education administrator based in Los Angeles, said she’s received warnings and notices about the resumption of collection of her loans. For several degrees, she still has $239,000 in outstanding debt, and she was informed her monthly payments on those loans will be roughly $3,000.

“I can’t afford it,” she said. “We just came out of the moratorium — not paying for five years. People getting these notices — they’re terrified. I’m uneasy, too.”

Brooks said she’s an informed borrower who stays up to date on each development and who knows her options. She plans to enroll in coding classes, at least half-time, which could place her loans in deferment, so she wouldn’t be required to make monthly payments, while she makes a financial plan.

Some options if you fear your wages will be garnished

There’s still time to take action.

According to Taylor, the Department of Education must provide 30 days notice before it sends a garnishment order to your employer. During that time, you can request a hearing to object by telling the department that the garnishment would cause you financial hardship. You can also request that the department reduce the amount being garnished and submit documentation about your income and expenses.

To do this, you must make your hearing request in writing, postmarked no later than 30 days after the garnishment order. Your loan holder will then arrange the hearing. If you’re unsure who your loan holder is, you can contact the Education Department’s Default Resolution Group.

If you were laid off from your last job, you can also object to garnishment if you have not been in your current job for 12 consecutive months. You can further request a hearing and object if you submitted an application for certain kinds of statutory discharges and those have not yet been decided. Some common reasons for statutory discharge of student loans include: if the school you attended closed before you could complete your degree, if your school owes you a refund but fails to pay it, if you’re experiencing total disability, or if you’re experiencing bankruptcy.

“If the borrower requests a hearing within 30 days after receiving the garnishment notice, the department cannot start garnishment until it issues a decision on the borrower’s objections and financial hardship request,” Taylor said.

You can request a hearing after the 30 day period is up, but in those cases the department will generally not stop garnishing your wages while the hearing request is pending.

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