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Featuring Rich Williams, Chief Customer Officer at Summer and former Deputy Assistant Secretary at the U.S. Department of Education.
Let’s start with the basics. Why are wages being garnished for those with student loans now?
Rich Williams: Those with student loans (either taken out for their own education or a dependent’s education) normally have to repay a certain amount of their loans back to the Department of Education every month. If a borrower misses payments for more than nine months, their loan is considered in default. At that point, the Department of Education must garnish up to 15% of your wages to repay the defaulted loans.
When the pandemic began, the government allowed borrowers to pause their payments for almost five years without consequence. Now – five years later – borrowers have to begin their repayments again. Unfortunately, more than 10 million borrowers are severely delinquent or already in default. Those borrowers should expect wage garnishments to begin again this summer.
What should employees who have defaulted on their loans expect?
Rich: Borrowers in default will receive a 30-day formal notice explaining the government’s intention to garnish their wages. That notice will include the amount they owe, their rights to object or request a hearing, and the option to avoid garnishment by repaying the defaulted debt.
Wage garnishment is just one consequence of default. Borrowers in default also face additional costs from collection fees, negative credit reporting, and reduction in federal disability checks, Child Tax Credit payments, and tax refunds. Since wage garnishments are forced, borrowers no longer have the option to prioritize payments towards rent, food, and healthcare over their student loan repayments.
What will be the employer’s responsibility if an employees’ wages need to be garnished?
Rich: Employers will receive garnishment orders from employees’ loan servicers and are legally required to comply. That means withholding up to 15% of an affected employee’s paycheck and sending it to the government until the employee is no longer in default or the loan is repaid.
What are the risks or downstream effects employers should be thinking about?
Rich: There are several. First, garnishment can devastate an employee’s take-home pay, cutting it by 15–25% when you factor in additional collection costs. That kind of financial stress can lead to burnout and higher turnover, especially since employees may switch jobs for higher salaries or to avoid garnishment altogether. This might also make recruitment more challenging if employees in default begin looking for jobs that will better support the cost of loan repayments.
Second, there are administrative and compliance risks. Employers are on the hook not only to garnish wages, but to stop garnishing wages in a timely manner. During the pandemic, the Department of Education spent years trying to reverse erroneous garnishments. States are now more aware of those failures, and may pursue action against employers or payroll vendors that mishandle the process.
Finally, there are reputational and diversity concerns. Wage garnishments disproportionately affect communities of color. When employees are forced to deal with wage cuts and legal orders through their workplace, it can feel adversarial and erode trust.
Is there anything employers can do to support their teams?
Rich: Absolutely. Employers have a small but powerful window to act. They can help employees get out of default or avoid default entirely by sharing clear, timely information and connecting them with tools to more easily manage and reduce their loans.
Summer, for example, offers a platform that helps employees identify the best-fit repayment plan out of 150 state and federal programs, and then navigate the complex paperwork on their behalf. This way, employees can not only reduce their monthly payments but also pursue forgiveness opportunities to reduce the total amount of loan they have to pay back. For those already in default, Summer helps return their loans to good standing, often through federal second change programs called ‘loan rehabilitation’ or ‘consolidation’.
The key is proactive communication and making sure employees know that support exists and how to access it.
Any parting advice for HR leaders navigating this?
Rich: Don’t wait until the garnishment order hits your desk. You have an opportunity right now to protect your employees and your organization from the fallout. Helping someone avoid default isn’t just good for them; it’s good for company morale, retention, and compliance. It shows your team that you care about their financial well-being.
Learn more about how Summer can help your team stay ahead of wage garnishments, and turn a looming liability into a loyalty-building benefit.
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