Student Debt Takes a Bite Out of More Paychecks

June 15, 2014
Wall Street Journal 
student loan news
Among consumers who defaulted on federal student loans, about 174,800 had the Education Department take some money out of at least one paycheck in the fiscal year ended Sept. 30, 2013. That puts the pace of wage garnishment on student loans up 45 percent from 10 years earlier.

Borrowers become candidates for wage garnishment if they miss 12 monthly payments on any federal student loan. The Education Department can automatically take as much as 15 percent of their after-tax wages, even without court approval. Candidates for garnishment range from college dropouts to doctors who took on large debt loads for their degrees, according to Natalia Abrams, executive director at the nonprofit group Student Debt Crisis. Many borrowers stay in garnishment for at least five to 10 years, adds Mark Kantrowitz, senior vice president at, a website that tracks student loan debt.

Lawmakers and regulators are divided over potential solutions. President Barack Obama recently issued an order to expand the number of borrowers eligible for a repayment program that lowers monthly payments and offers loan forgiveness. Sen. Elizabeth Warren (D-Mass.), meanwhile, proposed to let borrowers lower the interest on their loans; but her bill failed to win enough support to advance. Congressional Republicans say that reworking loan terms will not fix the larger issue, which is that federal financial aid contributes to the sharp rise in tuition.

Some camps say the government should be more aggressive with defaulted loans, and others argue that collection agencies and loan servicers do not do enough to place borrowers in repayment-assistance programs.

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