Nearly 10 million Americans in default on their federal student loans could start losing paychecks and tax refunds next year

Trump administration officials are preparing to restart penalties on defaulted borrowers in 2027, per a Washington Sun report citing five sources familiar with the matter

Treasury is moving ahead with plans to hire private debt collectors, possibly as soon as November. Sources said the plans are unlikely to be announced before the Nov 3 midterms

The two main tools are wage garnishment, which can take up to 15% of a paycheck, and Treasury offsets, which can seize tax refunds, Social Security payments and child tax credits

Some officials want to start with the tax year due April 15, 2027, though sources cautioned it could slip again

Treasury itself says more than 5 million borrowers have been in default for over six years, and another 5 million defaulted in less than a year. The government's student loan book is $1.7 trillion

Involuntary collections have been on hold since January. Postponing them has cost taxpayers about $5 billion so far, per the Committee for a Responsible Federal Budget

This is a consumer story markets aren't pricing yet. Pulling even a few hundred dollars a year from millions of already stretched households, right as refund season hits, lands straight on lower income spending in 2027. Subprime credit and discount retail are where it would show up first

Source: StockMarket.News