Americans with student loans who are behind on their payments could face having their wages garnished and other serious financial consequences now that the Trump administration restarted collections earlier this month. 

Repayments on student debt had been paused for five years since March 2020, when the COVID-19 pandemic disrupted the U.S. economy and caused unemployment to soar. Nearly 43 million borrowers owe a total of more than $1.6 trillion in student debt, according to the Department of Education.

Of that number, more than 5 million are in default on their loans, meaning they haven’t made a monthly payment in more than 360 days, the agency says. An additional 4 million borrowers are in late-stage delinquency, having not made a payment in at least 91 days. The DOE expects that 10 million, or 25% of student borrowers, could be in default on their loans in a matter of months. 

Older Americans are in worse shape when it comes to repaying student debt than younger borrowers. Although Americans over 50 years of age make up just 20% of those with outstanding college loans, they account for 33% of delinquencies, according to Oxford Economics which notes that younger borrowers are in relatively better shape. 

Student loans differ from other types of consumer debt in that there is no statute of limitations on collections, meaning the government can pursue punitive actions for defaulted loans indefinitely, noted Persis Yu, deputy executive director and managing counsel at the Student Borrower Protection Center. 

“It’s so much worse than just about any other financial product,” Yu told CBS MoneyWatch. “It’s a really small universe of things that have these harsh penalties.”

And because collections were paused for five years due to the pandemic, some student loan borrowers may have forgotten about the severe financial consequences of defaulting. “It’s left the collective consciousness,” she said. 

Here’s what to know about the potential repercussions of defaulting on student debt, including when your wages can be garnished. 

When can a lender garnish your wages?

The Trump administration announced on April 21 that the office of Federal Student Aid (FSA) would resume collections on defaulted federal student loans starting May 5. The DOE said at the time that it would email notices to borrowers in default over the following two weeks to make “them aware of these developments.” 

Notices from the FSA informing borrowers that their wages could be garnished will come “later this summer,” the DOE said. 

Under the law, a lender can garnish borrowers’ pay without going to court provided it has given them at least 60 days notice, generally by email, before initiating the collection action.

“All they have to do is send borrowers a notice that they are going to take your money, and you have 60 days to respond,” Yu said. 

Given that collections on student loans resumed earlier this month, people could begin to see their wages garnished in the fall, according to experts.

The government notice informs people how to start making payments, enroll in an income-driven repayment plan or sign up for loan rehabilitation to avoid having a portion of their paychecks seized. It doesn’t, however, instruct borrowers how they can stop wage garnishment. 

“The notices the Trump administration is sending out do not lay out defenses and don’t lay out the right to appeal wage garnishment on basis of financial hardship, and that’s really important for borrowers to understand,” Yu said. 

How much can be withheld from your paycheck?

A lender may garnish up to 15% of your disposable pay, but must leave borrowers with the equivalent of 30 times the federal minimum hourly wage of $7.25, or $217.50 per week. That applies even if a borrower resides in a state where the minimum wage is higher than the federal level.

Can other assets be garnished?

Yes. In addition to wages, the federal government may also seize tax refunds and Social Security retirement and disability benefits when loans are in default. 

If you’ve already filed your taxes and received a refund, it’s protected, Nancy Nierman, assistant director of the Education Debt Consumer Assistance Program in New York, told CBS MoneyWatch. “But you’d be on notice if you asked for an extension,” she explained. 

The government or a lender would likely have to take a borrower to court in order to target other assets. 

“That would entail getting a judgment and doing some kind of court intervention, and those are relatively rare,” Nierman said. 

How can you get out of default?

In some cases, student loan borrowers have the right to contest their default status. First, the debt might not be their own. Second, they might not owe the amount of debt the government claims they do. Third, they can claim that wage garnishment would cause them financial hardship.

“There are legitimate reasons why they can stop wage garnishment from occurring,” Yu said. “But I am very worried these notices aren’t telling people about the full scope of the relief.” 

Borrowers can also get current on their loans through other methods. For example, consider requesting loan rehabilitation to get out of default by making nine on-time payments in full over a 10-month period. 

You can also avoid entering default and having wages garnished through loan consolidation. Essentially, this process replaces your old debt with a new loan that’s in good standing and on which you can start making payments. If you’re able to repay your loans in full, that’s another way to exit default. 

The U.S. Department of Education could be headed for some major changes, with President Trump expected to issue an executive order directing Education Secretary Linda McMahon to start the process of dissolving the agency. 

Although the timing of such a move is unclear, reports that is in the works are already raising questions for millions of parents, students and taxpayers about the future of the Education Department and how the services it provides will be handled if the agency is dismantled. 

What does the Department of Education do?

The Education Department’s key functions include:

• Disbursing billions in student loans each year
• Operating the Free Application for Federal Student Aid, or FAFSA, which allows students to apply for loans, grants and other college aid
• Providing funding to help poor and disabled students enrolled in K-12 schools
• Ensuring equal access to education through its Office of Civil Rights
• Operating the Pell grant program, which provides qualifying low- and middle-income students with up to $7,400 per year to attend college
• Funding public charter schools
• Overseeing the the college accreditation system by reviewing all federally recognized accrediting agencies
• Collecting data on education and student outcomes, from early to higher education 

The Department of Education is “primarily about ensuring who can access the classroom — it’s not so much about what is being talked about in the classroom,” Peter Granville, a fellow at The Century Foundation and expert on higher education, told CBS MoneyWatch.

One major misconception held by many Americans is that the Education Department oversees school curriculums and learning, which are instead overseen by states and local school districts. Rather than setting public school curriculums, the Education Department’s role is primarily financial, distributing billions in government money to colleges and schools and managing the federal student loan portfolio. 

“Curriculum is handled by states and local governance — the Department of Education has historically had no role in setting curriculum,” Granville said. “The primary role of the Department of Education has been as a grant maker and a loan lender.”

For instance, the Education Department operates the Free Application for Federal Student Aid, or FAFSA, which is used by about 17 million students each year to apply for federal loans, grants and scholarships to attend college or vocational programs. The agency also manages $1.5 trillion in student loans, including repayment programs. 

Additionally, the Education Department handles Title I funding for low-income schools as well as for the Individuals with Disabilities Education Act. Here’s what to know about the agency.

Why does the Trump administration want to close the Education Department?

Mr. Trump is a vocal critic of the Education Department, describing it last month as “a big con job” and falsely claiming the U.S. is ranked 40th in education internationally but spends the most per pupil. (Spending on K-12 education is largely determined by local school boards and funded by property taxes.)

One of the president’s executive orders, signed Jan. 30, directed the Education Department to investigate “school choice programs,” saying that parents need “opportunities for students to attend the school that best fits their needs.” Vouchers that allow families to pay for private K-12 schools are a priority of conservatives, as such programs allow parents to use tax credits to pay for private schools, including Christian-based institutions.

In an email earlier this month to the agency’s staff entitled “Our Department’s Final Mission,” McMahon wrote that her goal is to “restore the rightful role of state oversight in education and to end the overreach from Washington.” That echoes language from Project 2025, the blueprint for a conservative administration written by the Heritage Foundation. 

“Federal money is inevitably accompanied by rules and regulations that keep the influx of funds from having much, if any, impact on student outcomes,” Project 2025’s section on the Education Department claims. “Eventually, policymaking and funding should take place at the state and local level, closest to the affected families.”

Can Mr. Trump abolish the Education Department?

Complete elimination of the Education Department would need congressional approval and 60 votes in the Senate, which is unlikely given the current makeup. 

However, the Trump administration could make changes to the agency, such as by cutting staff, without closing the entire department. The Trump administration is currently making massive employment cuts at several other federal agencies, such as the Social Security Administration and Veterans Affairs Department, describing the efforts as a way to reduce federal waste. 

The Trump administration could change some of the department’s oversight duties, such as those carried out by its Office for Civil Rights, which issues guidance on how civil rights laws should be applied. Trump has suggested a different interpretation of the office’s civil rights role. 

Under his administration, the department has instructed the office to prioritize complaints of antisemitism, and has opened investigations into colleges and school sports leagues for allowing transgender athletes to compete on women’s teams, according to the Associated Press.

The Trump administration isn’t expected to defend the Biden administration’s student loan forgiveness and repayment programs, which have been tied up in court cases, experts say. Last month, the Education Department removed the online application for income-driven repayment plans, according to Business Insider. 

What would happen to student loans?

The Education Department manages $1.5 trillion in student loan debt for more than 40 million borrowers. Although the Trump administration hasn’t outlined how it might want to reallocate the Education Department’s responsibilities, student loans could be moved to the Treasury Department, Granville noted. 

“If this is going to be a smooth handoff, some other agency has to pick up what the Education Department is setting down,” he said. “The most logical destination is the Treasury, but I worry about the risk of disruption from any handoff.”

Project 2025 posits that student loans should be handled by a “new government corporation with professional governance and management.” The blueprint calls for federal loans “to be assigned directly to the Treasury Department, which would manage collections.”

Project 2025 also favors phasing out income-based repayment plans, which help borrowers lower their monthly loan payments by making them proportional to their wages and salaries, and creating a new repayment plan that would require people earning above poverty wages to pay 10% of their income toward their loans. 

“[T]here should be no loan forgiveness,” Project 2025 states. 

What would happen to the FAFSA if the Education Department is abolished?

The Education Department required by law to release the FAFSA on or close to Oct. 1, allowing students and their families to apply for loans and other student aid during the college application season. Families must complete the FAFSA each year a student is enrolled in a college program if they wish to qualify for loans or other aid. 

“Congress passed a law that created the FAFSA, and unless Congress creates a new law, the FAFSA has to continue,” Granville said.

Still, it’s unclear which agency would handle the FAFSA if the Department of Education is dismantled, he added. 

What would happen to federal funding for public K-12 schools? 

Much of the Education Department’s money for K-12 schools is funneled through large federal programs, such as Title I for low-income schools and the Individuals with Disabilities Education Act. Those programs support services for students with disabilities, smaller class sizes with additional teaching positions, and pay for social workers and other non-teaching roles in schools.

During his campaign, Mr. Trump called for shifting those functions to the states. He has not offered details on how the agency’s core functions of sending federal money to local districts and schools would be handled.

Project 2025 suggests sending oversight of programs for kids with disabilities and low-income children first to the Department of Health and Human Services, before eventually phasing out the funding and converting it to no-strings-attached grants to states.

What do educators and Democrats say? 

There’s concern that making massive changes to the Education Department could impact millions of families and students who rely on the agency for loans, grants and other support, experts say. 

Moving some of those tasks to states and local governments could drive up costs for many families, said Sen. Bernie Sanders, an independent from Vermont. 

“That will mean higher local and state taxes to fill the void,” Sanders said at a Thursday press conference organized by the Senate Democrats about the potential dismantling of the Education Department. “In other words, shutting down the Department of Education would be a disaster for low income and working class families in every state of our country.”

The American Federation of Teachers, a union that represents 1.8 million K-12 teachers, said that it planned to fight the Trump administration’s efforts to dismantle the agency. 

“The directive to ‘return decision-making to the states’ fails the smell test,” said AFT President Randi Weingarten in a statement. “States and districts already govern schools through locally elected school boards, as they should. They put up most of the money and control most of the decisions—from approving curriculum to deciding who graduates.”

She added, “The Department of Education, and the laws it is supposed to execute, has one major purpose: to level the playing field and fill opportunity gaps to help every child in America succeed.”

The Associated Press

contributed to this report.

Washington — President Biden announced Friday that his administration is forgiving $5 billion in student debt for another 74,000 borrowers, marking the latest round of debt cancellation since the Supreme Court voided the president’s student loan forgiveness program.

The debt relief is the result of fixes to income-driven repayment forgiveness and the Public Service Loan Forgiveness program, according to the Education Department. Mr. Biden said that of the borrowers who can receive relief, nearly 44,000 are teachers, nurses, firefighters and others who are eligible for forgiveness after working 10 years of public service. Almost 30,000 Americans who will have their debt wiped clean have been repaying their loans for at least 20 years, but did not get the relief they earned through income-based plans, the president said.

With the latest round of student loan forgiveness, more than 3.7 million Americans have had their debt erased under the Biden administration, Mr. Biden said.

“From day one of my administration, I vowed to improve the student loan system so that a higher education provides Americans with opportunity and prosperity — not unmanageable burdens of student loan debt,” he said in a statement. “I won’t back down from using every tool at our disposal to get student loan borrowers the relief they need to reach their dreams.”

Education Secretary Miguel Cardona said the loan forgiveness comes while the Biden administration is working to provide greater debt relief to borrowers.

“The Biden-Harris administration has worked relentlessly to fix our country’s broken student loan system and address the needless hurdles and administrative inaccuracies that, in the past, kept borrowers from getting the student debt forgiveness they deserved,” he said.

Since the start of his presidency, Mr. Biden has undertaken several efforts to tackle student debt, including rolling out a new income-driven repayment plan last year and forgiving debt for certain types of borrowers, including those who worked in public service and are disabled. The president announced this month that those who took out less than $12,000 in loans and have been in repayment for 10 years will also have their remaining debt canceled, beginning in February.

Mr. Biden’s most sweeping effort was a program that would’ve provided relief to 40 million Americans who stood to have up to $20,000 in student debt wiped clean, but the plan was blocked by the Supreme Court in June. The high court determined that federal law did not authorize the loan forgiveness plan.

Melissa Quinn

Melissa Quinn is a politics reporter for CBSNews.com. She has written for outlets including the Washington Examiner, Daily Signal and Alexandria Times. Melissa covers U.S. politics, with a focus on the Supreme Court and federal courts.