After a five-year pause, the Department of Education (ED) announced on December 23, 2025 that it will officially resume administrative wage garnishment (AWG) to collect on defaulted student loans in January. AWG allows the government to seize up to 15% of disposable pay without a court order.
This update provides critical guidance for employers to prepare for and mitigate administrative and workforce impact.
Millions of employees are at risk.
Employers should be prepared for a rise in AWG orders in early 2026.
BORROWER NOTIFIED FIRST
AWG happens after a borrower is 270+ days late on payments.
The ED is required to send the borrower a “Notice of Intent to Garnish Wages” 30 days prior to the start of garnishment.
Borrowers can enter a repayment agreement to avoid garnishment or resume payments under a qualifying repayment plan.
Borrowers have the right to request a hearing to dispute the debt or claim financial hardship.
A WAGE GARNISHMENT ORDER IS THEN ISSUED TO THE EMPLOYER
After the 30-day notice period passes without resolution, the ED will issue a wage garnishment order to the employer.
Employers are required to begin withholding the specified amount from the employee’s wages immediately.
The order will specify how the employer must remit payments.
Employers must follow the instructions on the order exactly, including required data fields.
Employers are legally required to comply with the order.
Employers must continue withholdings until they receive official notification to stop.
Garnishment continues until the defaulted loan is paid in full or the default status is resolved.
EMPLOYER OBLIGATIONS / EMPLOYEE RIGHTS
Employees shall not be discharged from employment, refused employment, or subjected to disciplinary action due to wage garnishment.
Employees can initiate legal action against their employer if the employer discharges, refuses to hire, or takes disciplinary action based on garnishment.
Employees do not have to provide any information to the employer about the garnishment other than what is necessary for the employer to comply with the withholding order.
REQUIREMENTS FOR TERMINATED EMPLOYEES
If an employee whose wages are being garnished terminates, employers are required to promptly notify the ED or designated collection agency.
The wage garnishment order usually includes a section detailing the employer’s responsibilities, and will likely require:
Written notice that the employee has been terminated or resigned
The date the employment ended
Whether any final wages were paid
Failure to notify can expose employers to penalties.
Once wage garnishment starts, it is very difficult for an employee to recover.
Loan Rehabilitation is a primary method. Requires nine consecutive, on-time monthly payments. Garnishment does not stop until the fifth payment— meaning borrowers may need to double-pay for months. Many employees will find the financial lift of rehabilitation impossible.
Bankruptcy is NOT an option. Federal student loans are treated differently than most other debts like credit cards or medical bills as they are normally not eligible to be discharged by declaring bankruptcy.
The best approach is to avoid default and wage garnishment. The complication for borrowers in distress is that there are very limited public resources available.
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