The number of individuals who are at risk of having their wages garnished this summer because of unpaid student loans is nearly twice as high as the 1.2 million figure that was originally anticipated by TransUnion, according to a published report in The Wall Street Journal. About 6 million consumers are at least 90 days past due on their student loans and about 2 million of them are due to move into default in July, at which point they could face penalties like wage garnishment.
On top of that, an additional 1 million consumers are due to move into default in August and 2 million more on top of that in September, according to the report. Borrowers must be at least 270 days past due on their loan payments in order to be considered in default. The government is able to take up to 15% of an individual’s wages until the loan is repaid in full or the default status is resolved.
The government restarted collections on student loans last month after a nearly five-year pause due to the COVID-19 pandemic. Students were tasked with starting to make payments on their student loans last year. On average, consumers who are delinquent on their student loans have seen their credit scores drop by 60 points, according to TransUnion data.
The Education Department had previously announced it will not garnish the Social Security benefits of individuals who are in default on their student loan payments. According to a report from the Consumer Financial Protection Bureau, 1 in 3 Social Security beneficiaries with student loan debt rely on these payments for 90% of their income. A 15% garnishment could result in a reduction of around $296 from their monthly benefits, which could push already struggling borrowers into deeper financial distress.
There are about 43 million individuals who owe $1.6 trillion on their student loans.
