Wage Garnishing: The Latest on Student Loan Forgiveness

smiling woman reads letter while sitting on sofa at home

This article helps employers stay in compliance when garnishing wages for student loans—and outlines how employees can apply to have their student loans forgiven.

The Department of Education (ED) announced major changes related to federal student loans. These changes are part of the Biden Administration's Student Loan Debt Plan and will have a huge effect on student borrowers and their employers.

Below you'll find a snapshot of the new guidelines, along with resources, important dates, and FAQs that can help you navigate through the new regulations. We also encourage you to familiarize yourself with the new laws and to read through the original Department of Education announcement.

The pause on payments

In March 2020, ED announced a pause on the repayment of federal student loans. Since then, employers have suspended withholding wages for student loan debts. ED extended the suspension until December 31, 2022, so repayment resumed in 2023. After the pause, a "Fresh Start" initiative launched that restores previously defaulted student loans to good standing and stops collection actions. New orders are being issued for loans that are not forgiven and that fall back into default. As a result, employers may not receive new federal student loan garnishment orders until later in 2023 or in 2024.

Student loan forgiveness and repayment

The Student Debt Relief Program will forgive many student loans, so for some borrowers, repayment will never resume.

If the borrower's federal income in 2021 or 2020 was below $125,000 (individual; or married and filing separately), or $250,000 (head of household; or married and filing jointly), the borrower's loan would be forgiven. The forgiveness can be as large as $20,000 for Pell Grant recipients or up to $10,000 for non-Pell Grant borrowers.

When the suspension expired, the Fresh Start Initiative launched and allows borrowers to restore previously defaulted student loans back to their current standing.

Student loans: Additional info and resources

To find information and to receive updates about the Student Debt Relief Program, including who qualifies and how to apply, borrowers may log into (or create an account at) ED's Federal Student Aid site. Borrowers should also double-check that the site has their current contact information to ensure they will receive all communications about their student loan debt.

The application for forgiveness can also be found on the Federal Student Aid site.

The application is available in a mobile format as well as in Spanish, and contains fraud-prevention measures. Some borrowers may need to provide additional details after submitting their applications.

The Fresh Start Initiative

The Fresh Start Initiative began on January 1, 2023, and ends on December 31, 2023. Among other benefits, the program allows borrowers with defaulted student loans to restore their student loan(s) to current status and arrange for affordable payments.

The application for the Fresh Start Initiative is available on the Federal Student Aid site.

Important Dates

October 2022

ED released the application for student loan forgiveness. Borrowers may wish to complete it as soon as possible, as it takes four to six weeks to process. The application will be available for one year.

December 31, 2022

The pause on federal student loan repayment expired.

January 1, 2023

The Fresh Start Initiative began on January 1, 2023, and runs through December 31, 2023. Borrowers will need to apply for Fresh Start when the Department of Education publishes the application.

December 31, 2023

This is the last day to apply for student loan forgiveness. It is also the last day to apply for the Fresh Start Initiative.


Q: Will all previous student loans be reduced by $20,000 or $10,000?

A: No. The amount of reduction depends on the type of loan and the borrower's income. In general, if the borrower qualified for a Pell Grant, filed taxes individually, and showed less than $125,000 in income in 2020 or 2021, the loan will be forgiven up to $20,000. For non-Pell Grant recipients, the same income levels apply, but the maximum forgiveness is $10,000.

Q: Are Perkins and Federal Family Education Loans (FFEL) eligible for forgiveness?

A: Based on clarifications provided by ED in September, only Perkins and FFEL loans held by ED and consolidated into the Direct Loan Program before September 29, 2022 are eligible.

Q: What are the changes to the repayment process?

A: ED is proposing a new income-driven repayment plan that protects lower-income borrowers (by reducing limits of repayment to 5% of income from 10%). Check the Federal Student Aid site for details and updates.

Q: When the pause expires and loan payments resume, will employers receive new withholding orders?

A: ED advises that it will issue new garnishment orders for student loans that fall back into default.

Q: If a borrower owes $40,000 and qualifies for the forgiveness of $10,000, does the borrower still owe $30,000?

A: Yes, but those borrowers are still eligible for the Fresh Start Initiative.

Q: If a borrower owes $8,000 and qualifies for forgiveness for $10,000, is the debt entirely wiped out?

A: Yes, this forgiveness will satisfy the debt.

Q: What is the application process for forgiveness?

A: The ED will automatically forgive the debt if a borrower's information is on file. If the borrower's information is not on file, the borrower will need to apply for forgiveness and provide the requested information. For greater certainty, all borrowers may wish to apply, whether or not their information is on file with ED.

Q: How long does the process take?

A: Borrowers have a full year to apply but are encouraged to apply as soon as possible. Once an application is submitted, ED expects the process to take four to six weeks.

Q: Will the forgiveness amount be taxed?

A: The federal government does not consider forgiveness part of a borrower's federal income. (The American Rescue Plan Act of 2021 explicitly exempts student debt forgiveness granted between 2021 and 2025.) State laws vary, so borrowers should check the requirements of the state in which they filed their income taxes.

Q: Who does a borrower call if they have questions related to the Fresh Start Initiative?

A: Borrowers can obtain information on the Federal Student Aid website. They can also email ED's Default Resolution Group or call 1-800-621-3115. (Borrowers who are deaf or hard of hearing should call 1-877-825-9923.)

Q: Can a borrower opt out of student debt forgiveness?

A: Yes.

Garnishing Wages with ADP SmartCompliance® Solutions

Learn how ADP compliance solutions can help ease your administrative burden, lower your risk of liability, and help you stay in compliance when garnishing wages for student loans.