Preston Cooper at AEI recently published an analysis of the latest federal student loan data, and the results were sobering: 5.5 million borrowers in default, another 3.7 million more than 270 days late on their payments and 2.7 million in the early stages of delinquency.

A ‘tax bomb’ is set to detonate on New Year’s Day. The blast could throw the finances of millions of student loan borrowers off balance. The impending blast is heading for borrowers paying down their student debt through an income-driven repayment (IDR) plan and who seek debt forgiveness on or after Jan. 1, 2026.

Starting the week of Jan. 7, the Education Department will begin sending notices about paycheck deductions to about 1,000 of five million borrowers in default.

The Education Department signaled earlier this year that it would move to resume wage garnishment, among other forms of involuntary collection, for those in default.