What student loan borrowers need to know before Labor Day

Student loan borrowers face an ominous deadline as Labor Day approaches. The Trump administration announced earlier this year that it planned to resume collections for borrowers behind on their student loan payments, setting a deadline of “later this summer.”

In May, the Education Department began sending an estimated 195,000 student loan borrowers in default notifications that their federal benefits would be subject to collections, starting in June. The agency said that later in summer all 5.3 million defaulted student loan borrowers would receive notices that their wages could be garnished. The Trump administration hasn’t announced an official date, but with summer almost over, student loan holders should expect the changes imminently. 

Student loan payments were paused early in the pandemic to provide financial relief as Americans weathered an uncertain economy. The student loan relief was originally intended to last for just a few months but was repeatedly extended, first by the Trump administration and then by former President Biden during his time in office. 

“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” U.S. Education Secretary Linda McMahon said in April. “…Going forward, the Department of Education, in conjunction with the Department of Treasury, will shepherd the student loan program responsibly and according to the law, which means helping borrowers return to repayment—both for the sake of their own financial health and our nation’s economic outlook.”

During his time in office, former President Biden sought broad forgiveness for student loans, but ultimately his most far-reaching plans were struck down in court. Between the mixed messages from the current and former White House, it’s all been a lot for borrowers to keep track of. Payments on federal student loans officially resumed in October 2023, with interest kicking back in around the same time, though many student loan borrowers were likely hoping that Biden-era student debt relief proposals might override those changes.

The most important change right now will be an unpleasant one for any student loan holders in default. Borrowers behind on their loan payments may again see their paychecks reduced as the federal government claws back its cash. Anyone at risk of wage garnishment can expect a 30-day notice, but it’s best to contact the government to get on a repayment plan or into a similar program before wage garnishment kicks in.