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The U.S. Department of Education recently sent out alarming emails to millions of federal student loan borrowers in default, cautioning them that the government intends to start seizing portions of their income. This wave of notifications comes after the department announced last month that it would intensify collection activities against borrowers in arrears.

"Collections on defaulted federal student loans are resuming," read the email, warning borrowers that their tax refunds, federal benefits, and potentially their wages could be withheld if they don't begin repayment soon. Currently, over five million borrowers are in default, with projections suggesting that this number could double by the year's end.

In April, the Department highlighted a concerning trend: four million borrowers are in late-stage delinquency, which could lead to nearly 10 million borrowers defaulting on their loans within mere months. Such a scenario would place almost a quarter of the federal student loan portfolio in default.

The initial step the Department plans to take involves referring defaulted loans to the Treasury Offset program. This program, managed by the U.S. Department of Treasury, allows the government to intercept federal income sources, such as tax refunds and benefits, to recover owed amounts. "Going forward, the Department of Education, in conjunction with the Department of Treasury, will shepherd the student loan program responsibly and according to the law," stated U.S. Secretary of Education Linda McMahon.

The Treasury Offset program can capture 100% of federal tax refunds, up to 25% of federal employee retirement benefits, and up to 15% of federal wages, Social Security benefits, and Railroad Retirement benefits. If this measure proves insufficient, the Department will then employ administrative wage garnishment to further recover owed funds, allowing the government to order private employers to withhold up to 15% of a borrower's wages.

Despite the administrative power the government holds, borrowers are entitled to due process rights under the U.S. Constitution. Official notices of collection actions are typically sent by mail, providing borrowers with an opportunity to respond within a fixed timeframe. Failure to update contact information can hinder a borrower's ability to contest the government's claims.

Borrowers who dispute their default status or the debt itself can request an administrative hearing once they receive a formal notice. Additionally, those eligible due to severe financial hardship or total and permanent disability can apply for an administrative discharge.

To escape default, borrowers can explore loan rehabilitation or Direct loan consolidation, potentially allowing access to easier repayment options and pathways to loan forgiveness. As the Department of Education emphasizes, borrowers should carefully evaluate their options to ensure they select the most suitable course of action.

For those who are behind on payments but not yet in default, there remains an opportunity to bring accounts current through various means, including deferment, forbearance, or income-driven repayment plans. Timely coordination with loan servicers is essential to avoid the drastic measures spelled out in the government notifications.