Student loan collections restart hits teachers and low-income borrowers

[UNITED STATES] As the U.S. Department of Education resumes aggressive collections on defaulted student loans, millions of borrowers—including teachers—are facing wage garnishments, tax refund seizures, and reductions in Social Security benefits. For educators already grappling with tight budgets, these measures threaten to push many into deeper financial distress.

The return of collections comes amid broader economic pressures, including rising inflation and stagnant wage growth in the education sector. According to the National Education Association, average teacher salaries have failed to keep pace with living costs in most states, leaving many educators with little room to absorb additional financial shocks. This makes the reinstatement of loan collections particularly devastating for those already struggling to make ends meet.

The Return of Debt Collections

After a nearly five-year hiatus due to the COVID-19 pandemic, the Department of Education has reinstated collections on defaulted federal student loans as of May 5, 2025. This includes administrative wage garnishments, tax refund offsets, and reductions in federal benefits such as Social Security. Under the Treasury Offset Program, the government can withhold up to 100% of federal tax refunds and 25% of federal retirement benefits, including Social Security payments above a protected amount.

For teachers and other public sector employees, these measures are particularly concerning. Many educators already contend with modest salaries and limited financial flexibility. The prospect of losing a portion of their income to loan collections adds a significant burden.

Advocacy groups, including the Student Borrower Protection Center, have criticized the timing of the collections restart, arguing that many borrowers were not adequately notified of the change. A recent survey found that nearly 40% of defaulted borrowers were unaware that collections had resumed, leaving them vulnerable to sudden financial penalties without preparation.

The Financial Strain on Educators

Teachers often face financial challenges due to relatively low wages, especially in the early stages of their careers. With student loan debt averaging over $30,000 for graduates, the resumption of collections exacerbates an already precarious situation. The National Center for Education Statistics reports that teachers earn less than professionals in other fields with similar education levels, contributing to financial stress.

For many educators, the threat of wage garnishment is not a distant concern but an imminent reality. The Department of Education has indicated that garnishments could begin as early as this summer for borrowers who do not take action to resolve their defaulted loans.

Some states, such as Massachusetts and California, have introduced emergency measures to assist public sector workers facing garnishment, including legal aid programs and temporary hardship exemptions. However, these initiatives vary widely by state, leaving many educators without a safety net.

Disproportionate Impact on Women and Minorities

The resumption of debt collections is expected to disproportionately affect women, particularly women of color. Women hold approximately two-thirds of the nation's $1.6 trillion student loan debt and often face a gender pay gap that makes repayment more challenging. Black and Latina borrowers, who typically graduate with higher debt balances and lower incomes, are at heightened risk of default and subsequent garnishment.

Recent studies highlight that Black women borrowers are more than twice as likely to default on student loans compared to their white counterparts, further exacerbating racial wealth gaps. Advocates argue that the return of collections without systemic reforms will only deepen these inequities, calling for expanded debt relief programs tailored to marginalized communities.

Legal Protections and Options

Borrowers facing wage garnishment have several avenues to protect their income:

Bankruptcy: Recent policy changes have made it easier for borrowers to discharge student loans through bankruptcy. The Department of Education's attestation process allows borrowers to demonstrate undue hardship, increasing the likelihood of partial or full discharge.

Income-Driven Repayment Plans: Enrolling in an income-driven repayment plan can reduce monthly payments to an affordable level and may prevent garnishment.

Loan Rehabilitation: Borrowers can rehabilitate defaulted loans by making a series of agreed-upon payments, which can remove the default status and stop collections.

Additionally, the Department of Education has temporarily expanded its "Fresh Start" program, allowing defaulted borrowers to reenter repayment plans without penalty. This initiative aims to help nearly 8 million borrowers regain eligibility for federal aid and avoid collections, but experts warn that outreach efforts must improve to ensure impacted individuals are aware of the option.

It is crucial for borrowers to act promptly. The Department of Education typically provides a 30-day notice before initiating garnishment, offering a window to resolve the issue before deductions begin.

The resumption of federal student loan collections marks a significant shift in the financial landscape for millions of borrowers, including educators. For teachers already operating within tight financial constraints, the threat of wage garnishment poses a serious challenge. Understanding available options and seeking timely assistance are essential steps in mitigating the impact of these collections.