Millions of Student Loan Borrowers Face Collection Measures Next Year

More than 9 million borrowers remain in default on $234 billion in student loans since pandemic forbearance expired, facing severe collection measures such as wage garnishment and seized tax refunds as soon as next year, Stateline reported.

Those collection measures have been repeatedly paused, most recently this past January. Defaults began to climb again in late 2025 and early 2026, with 13% of student loans going into default in Louisiana and Mississippi during those two quarters alone, according to data from the Federal Reserve Bank of New York based on credit reports.

“It’s heartbreaking,” said Betsy Mayotte, president and founder of The Institute of Student Loan Advisors, a nonprofit that advises borrowers, schools, and employers. “People tend to get caught off guard when their tax refund is taken and if they’re struggling financially, a lot of times they’re counting on that refund to catch up.”

States with the highest default rates included Mississippi, Louisiana, and New Mexico, where more than a quarter of borrowers lived in default during the second quarter of this year. Even states with the lowest rates—such as Massachusetts, New Hampshire, Utah, and Wisconsin—saw default rates of 15%, according to the Stateline analysis of Education Department data.

Student loan borrowers in default face wage garnishment in 2026

Older borrowers are struggling more than they did before the pandemic, according to the bank’s analysis. Timothy Varro, 40, has made payments for 10 years on roughly $120,000 borrowed for college in New Jersey and law school in Rhode Island, but his balance has grown to $375,000 despite a job as an attorney for a bank in New York City.

“I don’t have rich parents to pay this off for me,” Varro said in an interview. “This may be my conspiracy theory, but I think this is punishment. They’re trying to send a message that this is what’s going to happen if you’re lower or working class and you strive for upward mobility.”

Varro supports his fiancé in a New York City apartment and deals with epilepsy that requires breaks from work. “I fear that unless something miraculous happens, I will default and my wages will be garnished for life,” Varro said. “I don’t think it’s asking too much to just give us a payment plan that’s reasonable.”

Taylor Lewis, 26, of Atlanta owes $29,000 for her bachelor’s degree in media and entertainment from Kennesaw State University, which she earned in 2023. After missing a payment by mistake, her loan went into default, and she was told she could not rectify it without paying the full $29,000.

“I was young, I was just trying to chase my dreams. I wanted to be a talk show host. I wanted to work in the media world,” Lewis said.

“I was just young and stupid, pulling out loans every semester and thinking, ‘Yeah I could pay that back. I don’t care about that.’ They prey on undergraduate students. They know we don’t have anything to lose at the time.”

Some states are attempting to catch borrowers before they sink by offering initiatives to advise students on loans starting in high school. Mila Tappan, education affordability training manager at the Finance Authority of Maine, said that her state offers a tax credit for student loan payments to help recruit and keep educated workers.

“We like to think that what we do makes a difference,” Tappan said. “Some of it is as simple as the mentality here in Maine, that you do what it takes to repay your debts.” Maine was among the states with the lowest rates of new defaults at the peak in late 2025 and early 2026, alongside New Hampshire, Vermont, Kentucky, and Wisconsin.

Private vocational schools showed very high rates of late payment on student loans, reaching as high as two-thirds for some institutions mostly located in the South, according to a 2025 federal report. Meanwhile, schools of medicine and health often recorded little or no default.

Preston Cooper, a senior fellow at the American Enterprise Institute, helped craft a process that could deny schools student loans if they cannot prove their degrees raise pay for graduates. Cooper said that the government struggled to communicate the end of the payment pause.

“The government did not do a very good job of communicating the fact that repayment was starting again for real. There were a lot of false starts,” Cooper said. “You had heartbreaking stories where people only found out they were delinquent on their loans when they suddenly got dinged on their credit.”

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