Federal government may garnish paychecks and Social Security for defaulted student loans

The U.S. Department of the Treasury is considering enforcement actions against borrowers who have defaulted on federal student loans, including garnishing paychecks and withholding federal benefits, according to The Washington Sun as reported by finance.yahoo.com.

Nearly $9.3 million student loan borrowers are currently in default nationwide, with an outstanding balance of approximately $234 billion, representing about 14% of the federal student loan portfolio as of June 2026, the Federal Student Aid office stated.

The Trump Administration is focusing on encouraging borrowers behind on payments to enroll in installment plans and use the Defaulted Loans Support Center, a resource launched in September to help borrowers understand default consequences and apply for rehabilitation or consolidation online.

Nick Avila, founder of San Diego-based United Debt Relief, told Moneywise that federal student loans are unique in that they can be collected without a lawsuit. The government can instruct employers to withhold up to 15% of disposable income and can intercept federal tax refunds and Social Security benefits through programs like the Treasury Offset Program.

Hans Goldstein, founder of the Southern California-based Retirement Literacy Foundation, noted that collecting from Social Security benefits involves additional complexities, though the government does have some authority in this area.