Wage Garnishment for Defaulted Student Loans: What Employers Need to Know

The return of wage garnishment for defaulted student loans has been anything but straightforward. In December 2025, the Department of Education (ED) announced that the first wave of garnishment notices would go out beginning the week of January 7, 2026 — the first time borrowers in default had faced collections in over five years. And while those initial notices did go out as planned, ED reversed course just weeks later, announcing a temporary pause on administrative wage garnishment to allow time for sweeping student loan repayment reforms under the One Big Beautiful Bill to be implemented.

That pause, however, is not permanent. ED has not announced a new restart date, and millions of borrowers remain in default — meaning wage garnishment could resume with limited advance warning. With more than 5 million borrowers currently in default and that number potentially swelling to 10 million or more, HR teams may want to start  preparing now.

By the numbers: wage garnishment for defaulted student loans

We wanted to know: How are Americans taking the news that wage garnishment for defaulted student loans is expected to resume? Here’s what we found in a national survey of U.S. adults we conducted in partnership with Morning Consult:

• A huge blind spot exists. Almost half (46%) of respondents with student loan debt aren’t familiar with ED’s intention to resume wage garnishment, revealing a significant gap in awareness among those who may be most directly affected.
• Anxiety is high among borrowers. Once informed about wage garnishment, 73% of respondents with student debt say they’re worried about the news because they are not confident in their repayment plan.
• Borrowers are eager for support in the workplace. Among respondents currently paying down student debt, 70% say employer student loan assistance benefits are valuable. 

Wage garnishment process: HR’s role and responsibilities

ED sends a notice to borrowers at least 30 days before they initiate wage garnishment, which informs the borrower of their default status and their rights (including their right to object to wage garnishment and the process for doing so), and offers the opportunity to avoid wage garnishment by voluntary repayment. 

If the borrower does not begin voluntary repayment or the process to object within 30 days of when they receive this notice, ED sends a wage garnishment order to the borrower’s employer, thus initiating the employer’s administrative role in the process. At this point, HR departments are tasked with serving as the bridge between government agencies, payroll systems, and affected employees. Fulfilling this role isn’t simply a matter of processing paperwork: it’s a complex, multi-step process that requires precision, empathy, and careful attention to legal requirements.

The garnishment process also places HR professionals at the center of what is often one of the most stressful financial situations an employee will face. Beyond the technical aspects of setting up deductions and managing compliance, HR teams face the need to support employees through a difficult time while ensuring the organization meets all legal obligations.

However, many of these professionals may be uninformed about the situation at hand: our survey found that only 41% of respondents who work in an HR, benefits, or payroll role are familiar with ED’s intent to resume wage garnishment. 

Understanding what is expected from HR leaders at each step in this process is crucial, as missteps may create legal liability risk for your organization and additional hardship for your employees. Let’s examine the specific administrative responsibilities HR teams shoulder when wage garnishment orders arrive:

• Confirm details. HR confirms receipt of the notice and reviews the order for completeness and clarity, directing any disputes or challenges to the issuing agency or the employee.
• Notify the employee. HR informs the affected employee, in writing in accordance with applicable law, offering information about the garnishment and next steps.
• Coordinate deduction setup. Teams work with payroll to set up the correct deduction amount as specified in the garnishment order.
• Prioritize withholdings. The deduction is mapped to the right tax code and prioritized in accordance with applicable law, such as child support or state debts.
• Remit payments. Payments are sent to the appropriate agency — by direct deposit, check, or another required method — and thorough records are kept to demonstrate ongoing compliance with the order.

Good to know: key insights for HR leaders

The stakes are high. Failure to comply with garnishment orders — including delayed processing, incorrect amounts, or missed payments — can create liability for your organization. Plus, because federal and applicable law or the garnishment order itself often requires employers to begin withholdings within a defined timeframe after receiving notice, the compressed timeline involved with the process can demand prompt, careful attention and can easily disrupt other critical HR priorities.

You can levy fees. Some states allow a small administrative fee per pay period to help offset the administrative burden of processing garnishments. However, many HR professionals choose not to implement these fees, since they rarely cover the true cost of the employer’s work and can add more financial stress for employees already facing hardship and may be subject to state-specific limitations.

The human impact is significant. Wage garnishment can cause confusion, stress, and embarrassment for employees — and as a result, HR teams may find themselves responding to employee questions, connecting employees with assistance programs, and managing workplace dynamics with colleagues facing financial challenges — all while working to remain in compliance with the complex administrative process that wage garnishment poses for employers without providing financial or legal advice.

A proactive approach to wage garnishment

The complex administrative burden, legal risks, and emotional impact of wage garnishment can be significant. But by proactively investing in benefits that are designed to empower their workforces to stay on top of student loan repayment, employers can drive meaningful impact for employees while avoiding some of the organizational impacts of wage garnishment altogether. 

Candidly enables employers to support employees through every stage of their student debt journey — and help address the personal and workplace impacts caused by falling behind on loan payments — with comprehensive solutions including:

• Our Core platform offers immediate impact through self-guided tools and resources that help employees better understand repayment options and know their options if they face delinquency. 
• Through our Coaching service, employees can get trusted, personalized guidance by scheduling one-on-one sessions with certified professionals, or through our 24/7 Conversational AI tool, Cait, for informational assistance. 
• Premium offerings like our Student Loan Employer Contribution and Student Loan Retirement Match solutions enable employers to deliver additional support that helps employees make progress on student loan repayment and build towards future financial security — all while encouraging benefit utilization and engagement.

Want to learn more? Reach out to our team at sales@getcandidly.com to learn about strategies helping your employees navigate student loan repayment, delinquency, and default in an educational, benefits-focused context.