9 Million Borrowers in Default Face Wage Garnishment Next Year

More than 9 million student loan borrowers are in default, owing a collective $234 billion, and involuntary collections — garnished wages and seized tax refunds — could begin as soon as next year, according to a Stateline analysis published November 12.

The reckoning has been postponed repeatedly. Pandemic-era forbearance, which let borrowers stop payments without being marked delinquent, finally expired last year. Collections were most recently paused this past January. Betsy Mayotte, president and founder of The Institute of Student Loan Advisors, a nonprofit advising borrowers, schools and employers, said she expects collections to start next year.

"It's heartbreaking," Mayotte said. "People tend to get caught off guard when their tax refund is taken and if they're struggling financially, a lot of times they're counting on that refund to catch up."

The Washington Sun reported in October that collection plans would likely be announced after the midterm elections. The U.S. Department of Education did not respond to a Stateline question about timing — a silence that leaves millions of borrowers guessing about when enforcement begins.

Where is default worst?

Mississippi, Louisiana and New Mexico have the highest default rates, with more than a quarter of borrowers in default, according to Stateline's analysis of Education Department data from the second quarter of this year. Even the lowest state rates — Massachusetts, New Hampshire, Utah and Wisconsin — sit at 15%. In plain terms: roughly one in six borrowers is in default even in the strongest states.

Defaults resumed in late 2025 and early 2026. In those two quarters alone, 13% of student loans in Louisiana and Mississippi went into default, and at least 5% did so in every state, according to Federal Reserve Bank of New York data based on credit reports. The New York Fed's analysis also found older borrowers struggling more than before the pandemic.

Who is caught in the default wave?

Timothy Varro, 40, a New York City bank attorney, has made payments for 10 years on roughly $120,000 he borrowed for college in New Jersey and law school in Rhode Island. His balance has ballooned to $375,000 — more than triple the original debt — and he cannot meet the $2,000 minimum payment. He graduated into a recession and started in low-paying public service jobs.

"I don't have rich parents to pay this off for me," Varro said. "This may be my conspiracy theory, but I think this is punishment. They're trying to send a message that this is what's going to happen if you're lower or working class and you strive for upward mobility."

"I fear that unless something miraculous happens, I will default and my wages will be garnished for life," Varro said. "I don't think it's asking too much to just give us a payment plan that's reasonable." He supports his fiancé in a small New York apartment and has epilepsy that at times requires breaks from work.

Smaller debts trap borrowers too. Taylor Lewis, 26, owes $29,000 from Kennesaw State University, where she earned a media and entertainment bachelor's degree in 2023. The degree did not open the media industry without more experience; she now works as an assistant manager for United Parcel Service in Atlanta.

"I was young, I was just trying to chase my dreams. I wanted to be a talk show host," Lewis said. "They prey on undergraduate students. They know we don't have anything to lose at the time." After missing a payment by mistake, she said her loan went into default and she could not rectify it without paying the full $29,000. She hopes for a repayment plan and plans to return to school — self-funded — for a human resources degree.

What are states and policymakers doing?

Maine runs loan counseling starting in high school, through emails, webinars and in-person events, and offers a tax credit for student loan payments to retain educated workers; its relief program has returned over $140 million. Connecticut offers similar credits for employers who help with student loans. Maine, New Hampshire, Vermont, Kentucky and Wisconsin had among the lowest rates of new defaults at the late-2025 peak.

"We like to think that what we do makes a difference. Some of it is as simple as the mentality here in Maine, that you do what it takes to repay your debts," said Mila Tappan, education affordability training manager at the Finance Authority of Maine.

Preston Cooper, a senior fellow at the American Enterprise Institute, helped craft a process that could deny schools access to student loans if they cannot prove their degrees raise graduate pay. He blames poor federal communication: "The government did not do a very good job of communicating the fact that repayment was starting again for real. There were a lot of false starts." He added: "You had heartbreaking stories where people only found out they were delinquent on their loans when they suddenly got dinged on their credit."

A 2025 federal report found some private vocational schools — mostly in the South — have late-payment rates as high as two-thirds, while medical and health schools often show little or no default. If collections launch next year as Mayotte expects, borrowers' first warning may be a smaller paycheck or a missing refund — the same surprise that caught them during the pause.