Millions Face Wage Cuts: Trump Policy Now Activated

Scissors cutting a hundred dollar bill on a red background — WAGE CUTS ANNOUNCED

A new policy threatens economic stability, sparking outrage among advocates and borrowers alike.

Story Overview

The Trump administration resumes wage garnishment for defaulted student loans.
5.3 million borrowers affected, with numbers expected to rise.
Critics label the move as “cruel” amidst economic hardship.
Federal measures include borrower protections, but concerns remain.

Trump Administration’s Policy Shift

The Trump administration has initiated the resumption of wage garnishments for federal student loan borrowers in default, a significant policy shift aimed at enforcing repayment. Notices were sent to approximately 1,000 borrowers in early January 2026, with plans to increase monthly.

This move ends a pandemic-era pause on collections that began in March 2020, which had provided temporary relief to millions.

This marks the first enforcement action of this kind since the COVID-19 pandemic, targeting federal loans.

The Department of Education is leveraging authority from the Higher Education Act, allowing garnishment of up to 15% of a borrower’s disposable pay without a court order. Critics argue that this policy is being implemented amid rising delinquencies and economic challenges.

Impact on Borrowers and Economy

The policy affects over 5.3 million borrowers who are currently in default, with projections suggesting that this number could swell to 13 million by the end of 2026.

The economic implications are significant, as affected individuals could see their disposable incomes reduced by up to 15% following a 30-day notice period. Borrower advocates, including the Student Borrower Protection Center, have condemned the move as unnecessarily harsh.

Despite borrower protections like hearings and minimum income safeguards, there is a growing concern over the potential socio-economic strain this policy may impose on low-wage families, already grappling with stagnant wages and an affordability crisis.

JUST IN: The Department of Education says the Trump administration will start garnishing the wages of student loan borrowers in default starting this week.

Carley Shimkus: “The department says they expect around 1,000 defaulted student loan borrowers to receive notices. The… pic.twitter.com/WhbgHSMjrC

— RedWave Press (@RedWave_Press) January 7, 2026

Advocates’ Response and Borrower Protections

Advocacy groups have been vocal in their opposition, labeling the resumption of wage garnishment as “cruel and unnecessary.”

They argue that more affordable repayment plans should be prioritized over aggressive collection tactics. Borrowers are encouraged to engage with governmental avenues for hearings or loan rehabilitation to mitigate the impact.

Legal experts highlight that while garnishment is a legal right of the Department of Education, borrowers have avenues to contest or rehabilitate their loans, thus avoiding wage deductions. The administration frames this enforcement as a necessary measure for fiscal accountability, a stance that has been met with both support and criticism.