Approximately 42 million people have federal student loans, and more than five million are in default. And as of January 2026, federal student loan wage garnishment is restarting. Employers will be responsible for garnishing employees’ wages if they are in default.
- Federal student loan wage garnishments resume in 2026 for borrowers in default; employers must withhold when ordered.
- Garnishable pay includes wages, commissions, bonuses, and pension payments; tips are generally excluded.
- Employers may withhold up to 15% of an employee’s disposable earnings, ensuring the employee keeps at least $217.50 weekly.
- Employers cannot fire employees for a single garnishment, must notify employee, remit funds to the Department of Education.
Student loan garnishments FAQs
A student loan garnishment is the process of withholding money from an employee’s wages if they are in default. You must garnish an employee’s wages when you receive a court or government order. You then remit the garnished wages to the Department of Education.
Defaulted government student loan garnishment is just one type. Other types of debts that lead to wage garnishments include overdue child support, unpaid taxes, delinquent credit card loans, and outstanding medical bills.
The government paused student loan collections on defaulted borrowers as a pandemic relief measure from 2020 to 2025.
Collections resumed in May of 2025. The Office of Federal Student Aid (FSA) will send official student loan garnishment notices to defaulted borrowers in the summer of 2026.
Compensation paid or payable for an employee’s services can be garnished, including:
– Wages and salaries
– Commissions
– Bonuses (e.g., sign-on bonus)
– Periodic payments from a pension or retirement program
Personal earnings that can be garnished typically don’t include tips.
Federal student loan borrowers who are in default (aka their loans are at least 270 days delinquent) may be subject to garnishment.
This 2026 garnishment resumption only applies to federal student loan borrowers. It does not apply to private borrowers (e.g., Sallie Mae). Unlike the government, private loan companies must go to court to garnish wages for private student loans.
There is a limit to how much you can withhold from an employee’s wages for garnishment. You can only garnish up to 15% of an employee’s disposable earnings for student loans.
Disposable earnings is defined as the amount of earnings left after federal, state, and local tax deductions and any other legally required deductions (e.g., mandatory retirement withholdings).
Say an employee’s disposable earnings are $2,000. You can only garnish up to $300 ($2,000 X 0.15) per pay period for student loan withholding.
The employee must have at least 30 times the federal minimum wage per week after the garnishment, which is $217.50 ($7.25 minimum wage x 30).
No. Under Title III of the Consumer Credit Protection Act (CCPA), you cannot discharge an employee whose earnings are subject to garnishment for any one debt.
However, the CCPA does not protect employees whose earnings are subject to two or more garnishments.
You must begin garnishing an employee’s wages when you receive a student loan garnishment order. Here’s the order of events:
– Receive student loan wage garnishment
– Calculate your employee’s disposable earnings so you don’t withhold more than 15%
– Notify the employee
– Set up a wage garnishment in your payroll software
– Remit garnished wages to the Department of Education
– Maintain accurate records, which you should have automatically if you use online payroll
You will need to update the garnishment withholding if the employee’s income changes. Stop withholding if you receive an official notice.
You can easily set up a wage garnishment in Patriot’s payroll software. Keep in mind that you are responsible for remitting garnishments to the appropriate agencies.
You can learn how to set up a wage garnishment here.
