Many New Yorkers Will Lose Federal Benefits In 30 Days

The time has come! Many New Yorkers expecting their federal benefits may be in for a total shock! Some New Yorkers will have money garnished from their paychecks in a month. The U.S. Department of Education has reignited its collection efforts on student loans. New Yorkers who defaulted on their school debts could face garnishments after 30 days. Collection efforts have been paused since the COVID-19 pandemic.

Under Trump's first term, in March of 2020, borrowers were protected from normal collection activities. The temporary relief officially ended after four years, in October 2024. However, President Biden decided not to pursue any involuntary collections before the end of his term. The new administration has decided to reignite collections on delinquent student loans.

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Student Borrowers In New York May Have Checks Taken

On Monday, May 5, 2025, the Department of Education resumed collections. It has issued a warning to borrowers who are behind on their loan - pay up or we'll take your federal benefits. The 195,000 student-loan borrowers who have defaulted started receiving 30-day notices from the Treasury Department. The notices let them know that their federal benefits could be subject to garnishment through the Treasury Offset Program.

That's bad news since many people are being laid off and prices are going up due to Trump's tariffs. This is another financial burden that many New Yorkers will have to shoulder. By no means am I saying people shouldn't pay their loans back, but there should be some consideration that our country is suffering from a bad economy.

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The garnishment of federal benefits of the almost 200,000 defaulted borrowers is just the beginning. As New Yorkers get hit financially from many angles, the Dept. of Ed. issued a statement saying,

"The first monthly benefit checks subject to offset are those scheduled for early June. "Later this summer, all 5.3 million defaulted borrowers will receive a notice from Treasury that their earnings will be subject to administrative wage garnishment."

Most borrowers who are in default have not made a payment in 270 days. The Dept. of Ed. says borrowers should be proactive and reach out to the Default Resolution Group to make a payment or set up a plan before involuntary garnishments take effect.

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