MITCHELL, SD (Mitchell Now) — The U.S. Department of Education plans to restart wage garnishment for borrowers in default on federal student loans in early 2026, a change expected to affect thousands of South Dakotans.
The department said it will resume involuntary collection actions, including wage withholding, for borrowers who have defaulted on their federal loans. Federal law allows the government to take up to 15% of a borrower’s disposable pay — after taxes and deductions — without a court order.
Advocates say the change could be especially difficult for South Dakotans living on modest incomes or working in rural and public-sector jobs. The state has roughly 118,000 federal student loan borrowers who collectively owe $3.7 billion, according to research compiled by EducationData.org. The average borrower balance is estimated at about $31,000.
South Dakota State University and the University of South Dakota both report cohort default rates below national averages — about 4% and 5% respectively — but officials note that rates don’t reflect the risk for borrowers who left school without a degree or who work in lower-wage industries.
The Department of Education said borrowers can prevent garnishment by entering income-driven repayment or loan rehabilitation programs and may request a hearing or review if they believe garnishment would cause undue hardship.
The policy change follows a pandemic-era suspension of most collection actions on defaulted loans and is part of a broader return to regular repayment operations.