Treasury lines up private collectors to garnish wages of nearly 10 million student loan defaulters, collectors work on commission while rollout waits until after midterms, Trump floats 2.5 percent interest cap as anesthetic

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President Donald Trump (L) speaks to reporters alongside First Lady Melania Trump after they cast their ballots during early voting in West Palm Beach, Fla., on Oct. 24, 2026. Alex Wong/Getty Images zerohedge.com

The Treasury Department is preparing to hire private debt collectors to garnish the wages of Americans in default on federal student loans — possibly as soon as November, though the plans are unlikely to be announced before the midterm elections, according to three sources cited by ABC News.

The scale is large. A Treasury release on September 30 counted more than 5 million borrowers who have been in default for over six years, and another 5 million who entered default in less than a year. As of March 2026, roughly 9 million borrowers carried $220 billion in defaulted federal loans. The Department of Education put total federal student debt at $1.7 trillion across 42.6 million people in June.

The mechanics deserve attention. The collectors will be paid on commission — their revenue will depend on how hard they squeeze. Wage garnishment can reach 15 percent of a borrower's after-tax income. The administration shelved these same collection tools in January, when the Education Department paused wage garnishment and tax-refund seizures after planning to issue about 1,000 notices in the first week of that month. The pause followed five years in which borrowers were taught, through successive extensions under both Trump and Biden, that federal loan obligations behaved more like suggestions than debts. Interest resumed in September 2023; most payments came due again the following month.

Into this steps the President with a counteroffer. Trump said Saturday he might support capping federal student loan interest at 2.5 percent — current rates on newer loans run from 6.52 to 9.07 percent depending on loan type. Representative Anna Paulina Luna, who has pushed a 2 percent cap since June, posted the video; Representative Michael Lawler's Affordable Loans for Students bill, which would set the rate at 2 percent, sits in committee. Democrats have gone further, with legislation from Representatives Joe Courtney and Senator Peter Welch to let borrowers refinance at zero percent.

The sequence is the story: years of forbearance, then a switch to commissioned enforcement, then a rate-cap sweetener timed to the ballot. The state lent the money, forgave the enforcement, and is now hiring bounty hunters on commission to collect what it taught borrowers they could ignore.