WASHINGTON – Today, the Department of Education announced that it will delay plans to seize tax refunds and garnish the wages of struggling student loan borrowers who have not been able to keep up with rising loan bills.
“Today’s announcement throws a lifeline to working and middle class families who are buckling under the weight of outdated student loan policies that don’t reflect today’s high cost of living and affordability crisis,” said Abby Shafroth, managing director of advocacy at the National Consumer Law Center. “The administration must now take the next step and reform harsh collection practices before turning them back on.”
Existing collection policies and income protections were set decades ago and have not been updated to reflect dramatic increases in cost of living. For example, the Department of Education only protects the first $217.50 per week in wages from garnishment, an amount set in 2009; the buying power of those wages has gone down by more than 30% since then and is well below today’s poverty line. Similarly, the Department only protects the first $750 per month of Social Security benefits from seizure, a protection set in 1996 that today is below 60% of the poverty line. Without reform, turning on collection, largely paused since 2020, would therefore put working families and older adults who fall behind on student loans at risk of being pushed into poverty by the federal government.
“The Department of Education’s current collection policies are outdated and can trap people already struggling to keep up with rising costs deeper in debt and even push them into poverty,” Shafroth said. “That’s the opposite of what our financial aid policies are supposed to do. Now is the time to reform collection policies to reflect the current cost of living and to help borrowers successfully manage their loans.”
Reforms should include increasing the amount of income protected for basic needs set decades ago to reflect today’s much higher cost of living; protecting anti-poverty benefits such as the Earned Income Tax Credit and Social Security benefits from seizure; capping the amount that can be seized from borrowers to the amount they’re actually behind on payments; and making it easier for people who fall behind to access options to successfully manage their loans.
Related Resources
- Blog: Dial Before You File: Protect Your Tax Refund If You Have Student Loans, December 10, 2025
- Fact Sheet: The Growing Impact of Student Loan Debt on Older Adults, September 2024
- Op-ed: Ending crippling debt seizure is one solution to our student loan nightmare, The Hill, April 2024
- Report: Voices of Despair: How Seizing the EITC is Leaving Student Loan Borrowers Homeless and Hopeless During a Pandemic, November 2020
- Report: Voices of Despair: Student Borrowers Trapped in Poverty When the Government Seizes Their Earned Income Tax Credit, March 2018
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