Student Debt Crisis: Millions in the U.S. at Risk of Wage Garnishment

• Nearly 6 million Americans are behind on their student loan debt payments
• Wage garnishment could begin as early as July
• What’s next: More delinquencies, lower credit, and financial strain for many families

The United States is facing an unprecedented student debt crisis. Following the end of pandemic-era relief programs, millions of borrowers have stopped making payments on their federal student loans. Currently, more than 5.8 million people are 90 days or more past due.

If they don’t act soon, they could face wage garnishment, credit score damage, and harsh financial restrictions. The Latino community may be especially vulnerable.

How Did the Student Debt Crisis Get This Bad?

As of April 2025, 31% of borrowers with federal student loans and outstanding balances are in default, according to TransUnion. That’s nearly three times the pre-pandemic rate of 11.7% in February 2020.

With the pandemic payment freeze over, 1.8 million people are expected to officially enter delinquency in July. Another 3 million may follow in August and September.

This spike comes as the Department of Education resumes collection actions. Alarmingly, even borrowers with good credit have now fallen into risky financial territory.

How Could This Student Debt Crisis Affect You?

• If you have student loans and are behind on payments, you could face wage garnishment—meaning a portion of your paycheck would be taken directly by the government to cover your student debt, with no way to opt out.
• Additionally, your credit score could drop by up to 60 points. This limits access to credit cards, personal loans, rental housing, and even basic services. For Latino families with tight budgets, this could mean a serious financial setback.

A Silent Blow to Your Wallet: Garnishment and Credit Damage

After 270 days of non-payment, your loan is considered in default. At that point, wage garnishment begins, and your credit report takes a long-term hit.

Even those with “prime” or “superprime” credit scores are now facing higher interest rates, reduced financing options, and new financial barriers. It’s a snowball effect that many fail to anticipate.

Experts Warn of Restricted Credit Access

“For those who don’t resolve their debts, the personal consequences—particularly in terms of credit access—could be severe,” said Joshua Turnbull, Senior Vice President at TransUnion.

What You Can Do Now

• Check your loan status at studentaid.gov
• Apply for income-driven repayment plans like the SAVE program
• Respond to notices—ignoring them only makes things worse
• Seek free or community-based financial counseling
• Don’t wait for default—act before you reach 270 days of delinquency

Student debt doesn’t go away on its own. With wage garnishments looming and credit scores at stake, it’s critical that borrowers take action now. Doing so could help avoid long-term financial damage to themselves and their families.