After a five-year pause, the federal government is resuming aggressive collection actions on defaulted student loans. The Trump Administration has confirmed that wage garnishment for borrowers in default will restart in January 2026. For millions of Americans who have fallen behind on payments, this marks a critical turning point. If you are in default, the window to protect your paycheck is closing. Here is what is happening and how Godbey Law can help you navigate these new challenges. The New Timeline: Notices Start Week of Jan. 7 The Department of Education will begin sending garnishment notices the week of January 7, 2026. While the initial wave will target approximately 1,000 borrowers, officials have confirmed the program will "increase in scale on a month-to-month basis" throughout the year. If you are more than 270 days past due on your federal student loans, you are considered in default and are at risk. What Happens When You Receive a Notice? Receiving a notice is not a bill—it is a legal warning. Once the notice is sent, you have a strict 30-day window to act before the government can order your employer to withhold up to 15% of your disposable pay. Unlike private debt collectors, the federal government does not need a court order to garnish your wages. They can simply issue an administrative order to your employer. New Rules Under the "One Big Beautiful Bill Act" Navigating your options is more complex now than in previous years. The One Big Beautiful Bill Act, [...]

New Parent PLUS Loan Rules If you’re a parent preparing to help your child pay for college, big changes are on the horizon. As of July 1, 2026, new limits, stricter rules, and fewer repayment choices will apply to Parent PLUS loans. Understanding these changes now can help you make more informed decisions, and avoid pitfalls later. What is a Parent PLUS Loan? Parent PLUS loans are federal loans that parents (or guardians) can take out on behalf of a dependent undergraduate student to help cover educational expenses. Before the changes, parents could borrow up to the full “cost of attendance” (as determined by the school) minus other aid. Historically, Parent PLUS loans have had more restricted repayment and forgiveness options compared to student-direct loans. But under the new law, those restrictions tighten considerably. Key Changes Effective July 1, 2026 Here are the major shifts that parents and families need to understand: 1. New Annual & Lifetime Borrowing Caps After July 1, 2026, new Parent PLUS loans will be limited to $20,000 per year (per child). Over the student’s full undergraduate career, the total maximum (aggregate) amount per child will be capped at $65,000. Under the old rules, parents could generally borrow up to the full cost of attendance. Those older loans are “grandfathered” in under legacy provisions, but only through either the remainder of the child’s program or up to three academic years. Because many families lean on Parent PLUS loans to help close the “tuition gap,” these caps [...]

Overview: What the “Big Beautiful Bill” Does The One Big Beautiful Bill Act, signed into law on July 4, 2025, makes sweeping changes to federal student-loan borrowing and repayment. While it aims to simplify and reduce costs, the practical impact may be to limit access and make repayment more burdensome for many borrowers. Here’s what’s new: New borrowing caps for graduate and professional students take effect July 1, 2026: Unsubsidized graduate: $20,500/year and $100,000 lifetime. Professional degrees (e.g. law, medicine): $50,000/year and $200,000 lifetime. Plus all new borrowers have a $257,500 lifetime cap on all Title IV loans; Parent PLUS loans are now capped at $20,000/year and $65,000 lifetime. The Grad PLUS program is eliminated, meaning no full-cost borrowing for graduate/professional school. Existing income-driven repayment plans—SAVE, PAYE, IBR, ICR—are phased out. Starting July 1, 2026, new borrowers may only choose between: A Standard Repayment Plan (fixed payments over 10–25 years), or A new Repayment Assistance Plan (RAP): a streamlined income-driven plan that caps payments at 1–10% of income over up to 30 years, after which remaining balance is forgiven.. If you are currently on SAVE, PAYE, IBR, or ICR, you must switch by July 1, 2028, or you’ll be moved automatically into RAP. Note that interest resumes August 1, 2025, for SAVE borrowers—meaning balances will grow for nearly 7.7–8 million people immediately. What This Means for Borrowers Graduate and professional students face much tighter borrowing limits and no access to Grad PLUS loans—few options to fund school may push some to private loans. Repayment simplification may benefit new borrowers, but could raise monthly payments for many—RAP extends repayment to 30 years and includes a $10 minimum payment, even for unemployed or low-income borrowers—and could increase total interest paid. Experts also warn of [...]

At Godbey Law LLC, we understand the financial challenges many individuals face, especially concerning student loan debt. With recent policy changes and economic shifts, it's crucial to stay informed about how these developments impact your financial well-being and the potential role of bankruptcy in managing debt. The Current Landscape of Student Loan Debt As of May 2025, the U.S. Department of Education has resumed collections on defaulted federal student loans, ending a pandemic-era pause that began in 2020. This move affects approximately 5.3 million borrowers, exposing them to wage garnishments, tax refund interceptions, and Social Security benefit offsets . Additionally, the recently passed (pending Senate approval as of the time of this article) "One Big Beautiful Bill" introduces significant changes to student loan repayment structures. The bill proposes stricter repayment options, reduces Pell Grant eligibility, and imposes tighter borrowing limits for students and parents . These changes may increase the financial burden on borrowers, making it more challenging to manage student loan debt. Screenshot from a Federal Loan Servicer on May 23, 2025 Bankruptcy and Student Loan Debt: Understanding the Limitations Traditionally, student loan debt has been challenging to discharge through bankruptcy. Unlike credit card debt or medical bills, student loans are generally non-dischargeable unless the borrower can demonstrate "undue hardship." This requires filing an adversary proceeding within the bankruptcy case and meeting specific legal criteria. In 2022, the Department of Justice, in coordination with the Department of Education, implemented new guidance to streamline the process for discharging [...]