Wage Garnishment Is Messy: Starting and stopping wage garnishment is harder than it sounds. Borrowers working for employers that use large payroll processors like ADP, Gusto, or Paychex generally see garnishment orders applied (and released) within a single pay cycle once the paperwork moves through the system.

But millions of Americans still work for small employers that handle payroll through a local accounting firm or cut checks by hand. For those workers, a garnishment order can take weeks to start, creating a backlog, and just as long to stop after a borrower rehabilitates or consolidates. 

The lag means borrowers can keep losing 15% of every paycheck even after their loan is technically out of default. We saw this happen when Covid first paused garnishments – some employees were reporting delays in getting the garnishments stopped. And getting refunds was also challenging.

Garnishment Is More Expensive Than Repayment: Wage garnishment is a far more expensive way to repay a federal student loan than any active repayment plan. The Department can take up to 15% of disposable pay through AWG, while the new Repayment Assistance Plan (RAP) caps payments at roughly 10% of discretionary income, and IBR caps payments at 10% for new borrowers. 

That gap alone can mean garnished borrowers pay 50% more per month than they would on an income-driven plan — without building any forgiveness credit.

Garnishment is also rarely the only collection tool in play. The Treasury Offset Program can seize tax refunds, Social Security benefits, and other federal payments at the same time. 

And once a loan is in default, collection costs are added on top of the balance, with most of what is taken from a paycheck or tax refund applied to collection fees and accrued interest before principal. The result is what The College Investor calls a “financial death spiral” — the loan balance barely moves no matter how much the government collects and all that money that’s taken from you is effectively wasted.

What Borrowers Can Do: There are two main options to stop or prevent garnishment:

1. Loan rehabilitation: Nine on-time payments based on income brings the loan out of default and removes the default mark from the credit report.
2. Direct consolidation: Combines defaulted loans into a new loan, and requires enrollment in an income-driven repayment plan, but the default remains on your credit report.

How This Connects: The College Investor has tracked default risk since the on-ramp ended, and our reporting shows the highest-risk borrowers are those who may miss the SAVE plan forbearance transition. With more than 7 million SAVE borrowers being moved off that plan, the pool at risk of slipping into default could grow.

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