Connect with us

Business

Student Loan Borrowers in Default Could See Wages Garnished in Early 2026

Published

on

Student Loan Borrowers in Default Could See Wages Garnished in Early 2026

The Trump administration will begin to garnish the pay of student loan borrowers in January, the Department of Education said Tuesday, stepping up a repayment enforcement effort that began this year.

Beginning the week of Jan. 7, roughly 1,000 borrowers who are in default will receive notices informing them of their status, according to an email from the department. The number of notices will increase on a monthly basis.

The collection activities are “conducted only after student and parent borrowers have been provided sufficient notice and opportunity to repay their loans,” according to the email, which was unsigned.

The announcement comes as many Americans are already struggling financially, and the cost of living is top of mind. The wage garnishing could compound the effects on lower-income families contending with a stressed economy, employment concerns and health care premiums that are set to rise for millions of people.

The email did not contain any details about the nature of the garnishment, such as how much would be deducted from wages, but according to the government’s student aid website, up to 15 percent of a borrower’s take-home pay can be withheld. The government typically directs employers to withhold a certain amount, similar to a payroll tax.

Advertisement

A borrower should be sent a notice of the government’s intent 30 days before the seizure begins, according to the website, StudentAid.gov.

The administration ended a five-year reprieve on student loan repayments in May, paving the way for forced collections — meaning tax refunds and other federal payments, like Social Security, could be withheld and applied toward debt payments.

That move ushered in the end of pandemic-era relief that began in March 2020, when payments were paused. More than 9 percent of total student debt reported between July and September was more than 90 days delinquent or in default, according to the Federal Reserve Bank of New York. In April, only one-third of the 38 million Americans who owed money for college or graduate school and should have been making payments actually were, according to government data.

“It’s going to be more painful as you move down the income distribution,” said Michael Roberts, a professor of finance at the Wharton School at the University of Pennsylvania. But, he added, borrowers have to contend with the fact that they did take out money, even as government policies allowed many to put the loans at the back of their minds.

After several extensions by the Biden administration, payments resumed in October 2023, but borrowers were not penalized for defaulting until last year. About five million borrowers are in default, and millions more are expected to be close to missing payments.

Advertisement

The government had signaled this year that it would send notices that could lead to the garnishing of a portion of a borrower’s paycheck. Being in collections and in default can damage credit scores.

The government garnished wages before the pandemic pause, said Betsy Mayotte, president of the Institute of Student Loan Advisors, which provides free advice for borrowers. But the 2020 collections pause was the first she was aware of, she said, and that may make the deductions more shocking for people who have not had to pay for years.

“There’s a lot of defaulted borrowers that think that there was a mistake made somewhere along the line, or the Department of Education forgot about them,” Ms. Mayotte said. “I think this is going to catch a lot of them off guard.”

The first day after a missed payment, a loan becomes delinquent. After a certain amount of time in delinquency, usually 270 days, the loan is considered in default — the kind of loan determines the time period. If someone defaults on a federal student loan, the entire balance becomes due immediately. Then the loan holder can begin collections, including on wages.

But there are options to reorganize the defaulted loans, including consolidation or rehabilitation, which requires making a certain number of consecutive payments determined by the holder.

Advertisement

Often, people who default on debt owe the smallest amounts, said Constantine Yannelis, an economics professor at the University of Cambridge who researches U.S. student loans.

“They’re often dropouts or they went to two-year, for-profit colleges, and people who spent many, many years in schools, like doctors or lawyers, have very low default rates,” he said.

This year, millions of borrowers saw their credit scores drop after the pause on penalties was lifted. If someone does not earn an income, the government can take the person to court. But, practically speaking, a borrower’s credit score will plummet.

Dr. Yannelis added that a common reason people default was that they were not aware of the repayment options. There are plans that allow borrowers to pay 10 percent of their income rather than having 15 percent garnished, for example.

The whiplash policy changes around the time of the pandemic were “a terrible thing from a borrower-welfare perspective,” Dr. Yannelis said. “Policy uncertainty is really terrible for borrowers.”

Advertisement

Business

Video: Why Your Paycheck Feels Smaller

Published

on

Video: Why Your Paycheck Feels Smaller

new video loaded: Why Your Paycheck Feels Smaller

Ben Casselman, our chief economics correspondent, explains why wages are not keeping up with inflation and what that means for American workers and the economy.

By Ben Casselman, Nour Idriss, Sutton Raphael and Stephanie Swart

April 18, 2026

Continue Reading

Business

Civil case against Alec Baldwin, ‘Rust’ movie producers advances toward a trial

Published

on

Civil case against Alec Baldwin, ‘Rust’ movie producers advances toward a trial

Nearly two years after actor Alec Baldwin was cleared of criminal charges in the “Rust” movie shooting death, a long simmering civil negligence case is inching toward a trial this fall.

On Friday, a Los Angeles Superior Court judge denied a summary judgment motion requested by the film producers Rust Movie Productions LLC, as well as actor-producer Baldwin and his firm El Dorado Pictures to dismiss the case.

During a hearing, Superior Court Judge Maurice Leiter set an Oct. 12 trial date.

The negligence suit was brought more than four years ago by Serge Svetnoy, who served as the chief lighting technician on the problem-plagued western film. Svetnoy was close friends with cinematographer Halyna Hutchins and held her in his arms as she lay dying on the floor of the New Mexico movie set. Baldwin’s firearm had discharged, launching a .45 caliber bullet, which struck and killed her.

The Bonanza Creek Ranch in Santa Fe, N.M. in 2021.

Advertisement

(Jae C. Hong / Associated Press)

Svetnoy was the first crew member of the ill-fated western to bring a lawsuit against the producers, alleging they were negligent in Hutchins’ October 2021 death. He maintains he has suffered trauma in the years since. In addition to negligence, his lawsuit also accuses the producers of intentional infliction of emotional distress.

Prosecutors dropped criminal charges against Baldwin, who has long maintained he was not responsible for Hutchins’ death.

“We are pleased with the Court’s decision denying the motions for summary judgment filed by Rust Movie Productions and Mr. Baldwin,” lawyers Gary Dordick and John Upton, who represent Svetnoy, said in a statement following the hearing. “He looks forward to finally having his day in court on this long-pending matter.”

Advertisement

The judge denied the defendants’ request to dismiss the negligence, emotional distress and punitive damages claims. One count directed at Baldwin, alleging assault, was dropped.

Svetnoy has said the bullet whizzed past his head and “narrowly missed him,” according to the gaffer’s suit.

Attorneys representing Baldwin and the producers were not immediately available for comment.

Svetnoy and Hutchins had been friends for more than five years and worked together on nine film productions. Both were immigrants from Ukraine, and they spent holidays together with their families.

On Oct. 21, 2021, he was helping prepare for an afternoon of filming in a wooden church on Bonanza Creek Ranch. Hutchins was conversing with Baldwin to set up a camera angle that Hutchins wanted to depict: a close-up image of the barrel of Baldwin’s revolver.

Advertisement

The day had been chaotic because Hutchins’ union camera crew had walked off the set to protest the lack of nearby housing and previous alleged safety violations with the firearms on the set.

Instead of postponing filming to resolve the labor dispute, producers pushed forward, crew members alleged.

New Mexico prosecutors prevailed in a criminal case against the armorer, Hannah Gutierrez, in March 2024. She served more than a year in a state women’s prison for her involuntary manslaughter conviction before being released last year.

Baldwin faced a similar charge, but the case against him unraveled spectacularly.

On the second day of his July 2024 trial, his criminal defense attorneys — Luke Nikas and Alex Spiro — presented evidence that prosecutors and sheriff’s deputies withheld evidence that may have helped his defense . The judge was furious, setting Baldwin free.

Advertisement

Variety first reported on Friday’s court action.

Continue Reading

Business

California’s gas prices push Uber and Lyft drivers off the road

Published

on

California’s gas prices push Uber and Lyft drivers off the road

The highest gas prices in the country are making it tougher for some gig drivers to make a living.

Gas prices have shot up amid the war in the Middle East. On average, California gas prices are the most expensive in the United States, according to data from the American Automobile Assn. The average price of regular gas in California is almost $6. The national average is a little above $4.

While Uber and Lyft drivers have concocted clever ways to cut gas consumption, they say that without some relief they will be forced to leave the ride-hailing business.

John Mejia was already struggling to make money as a part-time Lyft driver when soaring gas prices made his side hustle even harder.

“Unfortunately, it’s the economics of paying less to drivers and gas prices,” he said. “It actually is pulling people out of the business.”

Advertisement

Guests at The Westin St. Francis hotel get into an Uber.

(Jess Lynn Goss / For The Times)

Gig work offers drivers the freedom to work for themselves and more flexibility, but being independent contractors also means they must shoulder unexpected costs.

Ride-sharing companies say they’re trying to help, but drivers say the gas relief comes with caveats. For now, drivers say they’re being pickier about what rides they accept, cutting hours and are looking at other ways to make money.

Advertisement

Mejia, who started driving for Lyft more than a decade ago, said in his early days, he would sometimes make $400 in three hours. Now it takes 12 hours to rake in $200.

The San Francisco Bay Area consultant is an active member of the California Gig Workers Union, so he knows he isn’t alone. California has more than 800,000 gig rideshare drivers, according to the group, which is affiliated with the Service Employees International Union.

On social media sites such as Reddit and Facebook, gig workers have posted about how the higher gas prices are eating into their earnings. Among the tricks they are suggesting: reducing the number of times the ignition is turned on or off, avoiding traffic, working in specific neighborhoods and at times with high demand and switching to electric vehicles.

Gig drivers usually have only seconds to decide whether to accept a ride on the app, but they have become more strategic about which rides and deliveries they accept.

That means they are more likely to sit back in their cars and wait for higher fares for quick pick-up and drop-off.

Advertisement

“I highly recommend the ‘decline and recline’ strategy, rejecting unprofitable rides until a better one appears,” wrote Sergio Avedian, a driver, in the popular blog the Rideshare Guy.

Pedestrians cross the street in front of a Lyft and Uber driver.

Pedestrians cross the street in front of a Lyft and Uber driver on Wednesday. High gas prices have made it hard for gig drivers to make a living, cutting into their profits.

(Jess Lynn Goss / For The Times)

Uber, Lyft and other companies have unveiled several ways to help drivers save on gas.

Uber said drivers can get up to 15% cash back through May 26 with the Uber Pro card, a business debit Mastercard for drivers and couriers. Based on a worker’s tier, they can get up to $1 off per gallon of gas through Upside — an app that offers cash rewards — and up to 21 cents off per gallon of gas with Shell Fuel Rewards. The company also offers incentives for drivers who want to switch to electric vehicles.

Advertisement

“We know the price of gas is top of mind for many rideshare and delivery drivers across the country right now,” Uber said in a blog post about its gas savings efforts.

Lyft also said it’s expanding gas relief through May 26 because the company knows that the extra cost “hits hardest for drivers who depend on driving for their income.”

The company is offering more cash back, depending on the driver’s tier, for drivers who use a Lyft Direct business debit card to pay for gas at eligible gas stations. They can get an additional 14 cents per gallon off through Upside.

Drivers say the fine print on the offers dictates which card they use and where they fill up gas, making it difficult for them to save money.

“If I do the math, it’s ridiculous,” Mejia said. “They’re offering us nothing.”

Advertisement

Uber declined to comment, but pointed to its blog post about the gas relief efforts. Lyft also referenced the blog post and said “the gas savings were structured through rewards to maximize stackable opportunities.”

Guests at The Westin St. Francis hotel get into an Uber.

Guests at The Westin St. Francis hotel get into an Uber.

(Jess Lynn Goss / For The Times)

Gig workers have struggled with rising gas prices in the past.

In 2022, Lyft and Uber temporarily added a surcharge to their fares amid record-high gas prices following Russia’s invasion of Ukraine. This year, Uber is adding a fuel charge to its fares in Australia for roughly two months to offset the high cost of gas for drivers. Lyft said it hasn’t added a fuel charge in the U.S. or elsewhere.

Advertisement

Margarita Penalosa, who drives full time for Uber and Lyft in Los Angeles, started as a rideshare driver in 2017. Back then, gas was cheaper. She would easily hit her goal of making $300 in eight hours. Now she’s making just $250 after working as much as 14 hours.

Gas prices, she said, used to be less than $3 per gallon. Now some gas stations are charging more than $8 per gallon.

“Take out the gas. Take out the mileage from my car and maintenance. How much [do] I really make? Probably I get $11 for an hour,” she said.

Jonathan Tipton Meyers wants to spend fewer hours as a rideshare driver.

He already juggles multiple gigs even while driving for Uber and Lyft in Los Angeles. He’s a mobile notary and loan signing agent, a writer and performer.

Advertisement

Driving is “a very challenging, full-time job,” he said. “It’s very taxing and, of course, wages were just continually decreasing.”

A man stands for a portrait in a white button up shirt

John Mejia, a longtime Lyft and Uber driver, poses for a portrait before attending a meeting about unionizing gig drivers.

(Jess Lynn Goss / For The Times)

Even if oil continues to flow through the Strait of Hormuz, which Iran reopened Friday, it could take a while for gas prices to come down to earth, said Mark Zandi, the chief economist at Moody’s Analytics.

“There’s an old adage that prices rise like a rocket and fall like a feather,” he said. “I think that’ll apply.”

Advertisement

In the meantime, it will be survival of the fittest drivers. If enough of them decide to leave the apps, the ride-hailing companies could be forced to raise fares further to attract some back.

“Those who approach rideshare driving strategically, tracking expenses, choosing trips carefully, and optimizing efficiency are far more likely to weather periods of high gas prices,” wrote Avedian in the Rideshare Guy blog. “For everyone else, a spike at the pump can quickly turn rideshare driving from a side hustle into a money-losing venture.”

Continue Reading
Advertisement

Trending