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The Trump administration is increasing enforcement on federal student loan defaults, coinciding with a significant legislative move from Republican lawmakers to limit affordable repayment plan options. Collectively, these actions indicate that millions of borrowers might experience considerable reductions in their paychecks soon.

In May, the Department of Education restarted efforts to recover defaulted federal student loans. Utilizing the Treasury Offset program, about 5.3 million borrowers are subjected to having federal income streams intercepted before reaching their bank accounts. This includes garnishing up to 15% of federal employee wages and seizing up to 100% of payments to federal contractors and vendors. Additionally, the Treasury can intercept up to 100% of federal tax refunds and up to 15% of Social Security benefits, although the latter has been temporarily paused as announced earlier this week.

Further steps include administrative wage garnishment for defaulted borrowers, allowing the government to instruct private employers to withhold up to 15% of a borrower's wages. This action, combined with Treasury Offset, means the possibility of simultaneously garnishing wages and seizing tax refunds.

Republican lawmakers in the House of Representatives have passed a bill that could repeal the SAVE plan, an affordable repayment plan that impacts over eight million borrowers. If this legislation becomes law, these borrowers might face significantly higher payments under a modified version of the Income-Based Repayment (IBR) plan or alternatively, the newly proposed Repayment Assistance Plan (RAP), which could extend repayment periods up to 30 years before forgiveness.

Borrowers currently have limited time to respond to notifications from the government to avoid these stringent collection measures. Opportunities to dispute debts, request hardship exemptions, or pursue federal default resolution programs are available but time-sensitive.

The Department of Education indicates that administrative wage garnishment could be implemented by the end of the month, intensifying the urgency for borrowers to address their defaulted loans.

As the House-passed legislation now proceeds to the Senate for consideration, there remains a possibility for amendments. However, the future of affordable repayment plans seems uncertain, potentially leading to increased financial burden for millions of student loan borrowers.