Student Loan Default Means Garnished Wages in Iowa, Illinois, and Wisconsin

If you live in the Tri-States and have fallen behind on your student loans, here’s some news you really can’t afford to ignore. The federal government is gearing up to restart wage garnishment for millions of borrowers, and you could be one of them.

According to a recent Newsweek report, the U.S. Department of Education is once again using its collection powers to withhold portions of paychecks from borrowers in default. This debt retrieval process has been paused for several years due to the pandemic. With an estimated 9.7 million Americans now defaulting on student loans, this marks a serious change in the effort to collect unpaid student debt.

So what’s happening exactly?

If you're more than 270 days late on your federal student loan payments, your loan is essentially in default. That puts you at risk for what's called administrative wage garnishment. This means the government can take up to 15% of your paycheck without taking you to court.

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In states like Iowa, Illinois, and Wisconsin, where thousands are struggling with the rising cost of living, the impact could be huge. And it’s not just your paycheck at risk: tax refunds and Social Security benefits can be withheld too.

If you find yourself in default, you could try the Fresh Start program used to temporarily pause collections for borrowers. The program should be available until September 30, 2025. If you apply, your default status could be wiped clean, and you’ll have access to flexible repayment plans like SAVE, which can lower monthly payments.

However, according to Newsweek, the future of the SAVE repayment plan is currently uncertain after a federal appeals court blocked key parts of the program in February 2025. The court ruled that the Department of Education overstepped its authority. As a result, access to the SAVE plan and other income-driven repayment applications were suspended.

While some borrowers already enrolled in SAVE may still benefit from its lower payments and interest protections, the plan’s long-term use is doubtful and could be permanently rewritten or discontinued. For now, borrowers should be ready to return to less generous repayment options.

Even if you’ve already received a Notice of Intent to Garnish, don’t panic. You have 30 days to request a hearing, during which no money can be taken from your paycheck. You can also work out a new repayment plan or explore options like loan rehabilitation or consolidation. Forbes has marked out several different paths for this new era of repayment.

Personally, I am so glad I never stopped paying on my student loans, even when it was tough during COVID. Now I'm 3 years removed from them, and what a sense of relief when the final one is paid off. For those that put a pause on their payments, however, if you get a notice in your mail, don’t ignore it. The clock is ticking, and acting fast can help protect your paycheck.