WASHINGTON — Student loan borrowers who receive federal benefits can now have their payments garnished if they’re in default on their loans. On Monday, the Department of Education announced it has begun issuing 30 day notices to defaulted student loan borrowers warning them that federal benefits and wages are subject to the Treasury Offset Program.
That program allows for the Treasury Department to collect debts through the garnishment of wages and other benefits like Social Security payments, tax refunds, and more. The first round of notices were sent this week to an estimated 195,000 borrowers who are in default. The Department of Education says the first checks that could be impacted by garnishments are those scheduled for early June.
By the end of summer the department estimates that 5.3 million defaulted borrowers will receive a notice from the Treasury regarding garnishments.
Student loans are considered in default after they have not been paid for 270 days or more. Last month, the Associated Press reported that just 40% of borrowers are up-to-date on their payments. Along with the 5.3 million already in default, an additional 4 million are between 91 to 180 days late.
Defaulting on a student loan can also negatively impact your credit score or lead to asset seizures.
The Education Department advises borrowers struggling to make payments to contact the Default Resolution Group to learn about options that can help. The department says the DRG can assist borrowers in making payments, enrolling in an income-driven repayment (IDR) plan, or signing up for loan rehabilitation.
