The Trump administration is getting ready to go after the paychecks, tax refunds and federal benefits of millions of Americans who have fallen behind on their student loans. It just doesn't want you to hear about it until after you vote.

According to five sources who spoke to The Washington Sun, administration officials are preparing to impose financial penalties on millions of borrowers in default next year. Three of the sources said the Treasury Department is moving ahead with plans to hire private debt collectors, possibly as soon as November, and the sources said those plans are unlikely to be announced before the midterm elections.

One of them said it plainly:

"It would be politically insane to do this before the midterms — but 2027 probably makes a little more sense to give Treasury time to get contracts signed, up and running."

Who gets hit

About 9.5 million people, 1 in 5 federal student loan borrowers, are in default, meaning they are more than nine months behind. That number has jumped from 5.3 million since June 2025, according to data from the Office of Federal Student Aid.

The government has two main ways to collect from them, the Sun explains:

• Seizing payments the government owes you, such as tax refunds, Social Security checks, the earned income tax credit and the child tax credit.
• Garnishing your wages, by ordering your employer to send part of your paycheck to the government. Persis Yu of the advocacy group Protect Borrowers told Common Dreams that garnishment "can be up to 15% of somebody's paycheck."

Yu also warned that the earned income tax credit, which she called "one of our largest anti-poverty programs," is often what working families use to fix a car, catch up on rent or pay for child care.

The administration's own staff warned about this

Last year, the White House budget office began helping the Education Department prepare to seize wages and benefits. Treasury officials blocked it, worried about the economic damage, the Sun reports.

Treasury staff also pointed out who would get hurt. According to one source, their message to senior officials about the borrowers was: "This is not who you think it is. The demographics are not good for us."

They were right about the map. The AP found that 14 of the 15 states with the highest student loan default rates voted for Trump in 2024. Mississippi is worst, with 28.3% of borrowers in default, followed by states like Louisiana, Alabama, West Virginia, Oklahoma, Georgia, South Carolina and Texas.

So the administration has known for a year that collections would hit its own voters hard, and its answer is to start after those voters have cast their ballots.

Trump's budget bill made repayment harder

Trump's budget bill, the "One Big Beautiful Bill," eliminated the SAVE repayment plan and moved borrowers into a new plan. Even before the law's changes took effect, the Center for American Progress notes, more than 4 in 10 borrowers reported "making tradeoffs between loan payments and covering their basic needs."

Michael Pierce, Protect Borrowers' executive director, told the Sun that restarting collections would be "a catastrophe for families across the country — seized tax refunds, garnished wages, and even less money to put food on the table or make rent."

"Restarting debt collection the moment any political accountability has passed just shows how little interest Trump has in helping working families stay afloat," he said.

They may not even have the records

Advocates say the government may not be able to prove what many borrowers owe. Pierce told the Sun that Treasury may not even have the data it needs to certify the debts, which the law requires before it can collect. "There are people who you look in their federal records, and there's decades missing, years missing," Yu told Common Dreams. "And so they're collecting on people who they don't have complete payment histories for."

The Education Department's response to the Sun's questions: "We don't respond to fishing expeditions."

The bottom line

According to The Washington Sun's sources, the Trump administration is preparing to hire private debt collectors and penalize the roughly 9.5 million Americans in default on student loans — with officials pushing to seize wages, tax refunds and benefits — and is unlikely to announce it before the midterms. One source said doing it before the election would be "politically insane." Its own Treasury staff warned the people hurt would be Trump voters, and 14 of the 15 states with the highest default rates voted for him.

Source

Trump Aides Plan to Penalize Defaulting Student Loan Borrowers — The Washington Sun