The Trump administration has reinstated wage garnishment for federal student loan borrowers in default following the expiration of pandemic-era repayment, reporting, and collections moratoria. Delinquency rates have skyrocketed recently and upwards of 3 million borrowers are believed to be delinquent (more than 270 days past due on their payments).
Garnishment notices were issued to approximately 1,000 borrowers this week, with plans to add to the roles monthly. Up to 15% of after-tax wages can be seized (subject to protections ensuring the borrower retains a minimum income), along with federal tax refunds and some federal benefits like Social Security. Borrowers receive 30 days’ notice and have the right to request hearings to dispute the debt, argue financial hardship, or avoid garnishment by arranging repayment through rehabilitation or loan consolidation.
Although individuals who take out loans are obligated to repay them, there is nonetheless a tension between enforcing repayment and increasing financial strain on borrowers.
Stepped-up payment enforcement, just like the resumption of payment requirements and reporting last year, will have a nuanced impact on consumer spending as it rolls out. The hit to overall spending will be modest but certain groups of borrowers, particularly those with lower incomes and/or subprime credit, are likely to experience increased financial strain as they adjust their budgets.
Student Loan Fallout
Jan 08, 2026
The Trump administration has reinstated wage garnishment for federal student loan borrowers in default following the expiration of pandemic-era repayment, reporting, and collections moratoria. Delinquency rates have skyrocketed… Read the rest
Coerced Debt Bill Signed
Dec 23, 2025
New York Governor Kathy Hochul has signed NY S 1353B into law, and AFSA’s State Government Affairs team have received the final, official chapter amendment. The bill, as originally presented to the governor, raised significant concerns… Read the rest
AFSA Urges Clarity on Debt Collection Act
Dec 18, 2025
AFSA’s State Government Affairs team recently submitted a comment letter on California’s Department of Financial Protection and Innovation Debt Collection Licensing Act. AFSA and the California Financial Services Association… Read the rest
NY Fed: Rate Caps Don’t Work
Dec 18, 2025
A recent working paper issued by the Federal Reserve Bank of New York, Less for You, More for Me: Credit Reallocation and Rationing Under Usury Limits, delves into the age old question of the efficacy of usury limits, i.e., interest rate caps.… Read the rest
AFSA Submits Comment Letter on Small Business Lending Data Collection Proposal
Dec 17, 2025
Earlier this week AFSA submitted comments on the CFPB’s proposal to change small business lending data collection requirements established under Section 1071 of the Dodd-Frank Act (the 1071 Rule). This proposal contemplates streamlining… Read the rest
AFSA Supports Major Bipartisan Housing Legislation
Dec 17, 2025
AFSA is pleased to support the bipartisan Housing for the 21st Century Act, which will boost housing supply, improve affordability, and streamline existing regulations for millions of Americans.
Thanks to House Financial Services Committee… Read the rest
AFSA C3 Index
Dec 11, 2025
AFSA’s Consumer Credit Conditions (C3) Index for the third quarter of 2025 revealed a challenging quarter for consumer lenders offset by growing optimism about business conditions over the next six months. The survey of AFSA member companies… Read the rest
CFPB Funding
Dec 11, 2025
In a new letter to President Trump and congressional appropriations committee leaders, the CFPB’s Acting Director Russell Vought wrote that the Bureau will need $279 million next year to maintain its required activities. … Read the rest
Industry Expertise | How Lenders Can Innovate with AI Without Increasing Regulatory Risk
Dec 10, 2025
“Industry Expertise” is sponsored content produced by AFSA’s Business Partners’ to provide thought leadership and best practices for AFSA member companies. For more information about this sponsored content opportunity, contact Dan … Read the rest
AFSA in American Banker
Dec 09, 2025
We appreciate the American Banker’s coverage of our exclusive Consumer Credit Conditions (C3) Index, which we release quarterly.
The C3 Index is designed to highlight the crucial role the consumer credit industry plays in the broader