If you hold a credit card debt or a medical bill, a creditor has to take you to court, win a judgment, and get a judge’s permission before they can touch your paycheck. That process can take months. But federal student loans are different. They come with a superpower called Administrative Wage Garnishment (AWG), also known as the “No-Court Paycut.” This week, the reality of that power is hitting home for millions of Americans. Following the expiration of the “Fresh Start” initiative and the end of the pandemic-era safety nets, the Department of Education has begun the machinery to collect on defaulted debt.
While a temporary pause was announced mid-month to allow for new legislative reforms, the notices have already started flying. For 5.5 million borrowers currently in default, the threat of a sudden 15% income drop is no longer a “what if”; it is a “when.” Here’s what you need to know and how you can prepare.
