Student Loans and the Racial Politics of Punishment
As wage garnishment resumes, Black and Hispanic borrowers face the harshest consequences of a debt system shaped by decades of economic and racial inequality.
While many Americans will ring in the new year with resolutions and fresh starts, millions of student loan borrowers will face a different kind of beginning—the return of wage garnishment after a five-year reprieve. Starting the week of January 7, the Trump administration will begin seizing wages from student loan borrowers who have defaulted on their loans. For the first time since the pandemic began in 2020, the government will order employers to withhold money directly from borrowers’ earnings to collect on student debt. What the Department of Education frames as routine collections activity is, in reality, a devastating assault on millions of Americans already struggling to survive.
The reality of paying for college first struck me when I got into one of the first schools I applied to in Chicago. I remember the excitement I had, running to my parents to tell them the news. They were happy for me. As two parents who had not had the chance to finish college, this was a chance for their own son to realize the dream they once had.
When I shared the financial aid package, their happiness faded away. The reality that attending that university was not going to be feasible set in quickly.
I ended up going to another university, but only with the help of student loans. And I should add, the loans weren’t just for tuition, they covered my entire cost of living—housing, meals, transportation to campus. On my own, I couldn’t afford those things. I took on that debt believing education would be the pathway to stability my parents didn’t had. When the time comes each month for me to make payments, I make them, but the reality is I’m one medical emergency, one job loss, one financial shock away from the edge that millions of borrowers are already falling over. I am one of many who took on debt not as a choice, but as the only pathway available.
This decision arrives at a moment when millions of Americans face economic precarity. More than 1.1 million people lost their jobs in 2025 as the labor market cooled. The unemployment rate climbed to 4.6 percent in October and November, the highest since 2021. Health care premiums are set to rise for millions.
This cruelty is deliberate.
The Trump administration ended the five-year pause on collections in May, already beginning to seize tax refunds and Social Security payments from borrowers in default. Now wage garnishment completes the arsenal of involuntary collections. More than 5 million borrowers currently sit in default, meaning they have not made a payment in over 270 days. And millions more teeter on the edge of delinquency.
For individuals who have defaulted on their loans, up to 15 percent of take-home pay can be seized, though borrowers must be left with at least $217.50 per week—a calculation based on 30 times the federal minimum wage of $7.25 per hour.
The government can also continue seizing tax refunds with no limit on how much can be taken each year. This means even the Earned Income Tax Credit and Child Tax Credit, programs specifically designed to keep low-income families out of poverty, can be confiscated to collect on student debt. Wage garnishment will continue alongside these tax seizures until either the loan is paid off or the borrower exits default through limited, complicated processes. Many borrowers in default have already exhausted their two allowed opportunities to rehabilitate or consolidate their loans. For them, there is no pathway back to affordable repayment and many are trapped.
The consequences inevitably compound onto the borrower. Defaulted loans damage credit scores for seven years, making it harder to rent an apartment, buy a car, or access other forms of credit. Borrowers in default are barred from accessing additional federal financial aid, which means they cannot return to school to complete their degree, the very credential that might increase their earnings enough to repay their loans. Some states even suspend professional or driver’s licenses for defaulted borrowers, further destroying their ability to work and earn income.
While wage garnishment threatens all borrowers in default, its impact is neither random nor equally distributed. The communities bearing the heaviest burden are the same communities that have faced generations of systemic disinvestment and wealth extraction. Student loan default is not a personal failure but a structural crisis rooted in decades of systemic inequality—one that falls most heavily on Black and Hispanic borrowers who have been systematically denied the opportunity to build wealth and financial security.
Default Is Not Colorblind
Data reveals what advocates have long known—student loan default is inseparable from racial injustice. According to research from The Pew Charitable Trusts, half of Black borrowers and 40 percent of Hispanic borrowers have experienced default, compared to less than a third of white borrowers. Even more striking, three-quarters of Black and Hispanic borrowers who default do so multiple times, compared to 56 percent of white borrowers who default. This is not coincidence as much as it is an outcome of a system designed to extract from communities that have been systematically impoverished.
Consider the circumstances that push borrowers into default. Black borrowers are far more likely to face every barrier to successful repayment—70 percent earn less than $50,000 annually, compared to 49 percent of Hispanic borrowers and just 34 percent of White borrowers. Nearly half of Black borrowers report it took six months or longer to find employment after leaving school, precisely when student loan payments begin. Over half of Black borrowers report having a negative net worth, meaning their debts exceed their assets entirely.
Hispanic borrowers face their own distinct challenges. They are significantly more likely to live in states with higher-than-average costs of living, making every dollar stretch less far. They attend school part-time at higher rates than their white peers, often because they must work full-time to survive, which makes degree completion more difficult and leaves them with debt but no credential. And they enroll in income-driven repayment plans at surprisingly low rates, just 32 percent compared to 45 percent of Black borrowers, suggesting many are not connected to the very programs designed to prevent default.
What we are witnessing is what abolitionist geographer Ruth Wilson Gilmore calls “organized abandonment”—the intentional disinvestment in communities which, in turn, creates opportunities for extraction, revenue generation, and carceral enforcement to fill the cracks of a compromised social infrastructure.
Black and Hispanic communities have been systematically denied resources for generations. Black families have faced discriminatory barriers to homeownership and wealth accumulation, from redlining to ongoing appraisal discrimination. White households have almost four times the wealth of Black households and more than 2.5 times that of Hispanic households. Study after study finds that Black and Hispanic job applicants receive significantly fewer callbacks than equally qualified White applicants, and this discrimination has not declined over time. For every dollar a typical white worker earns in America, a Black worker earns 84 cents, and a Hispanic or Latino worker earns just 76 cents, with wage gaps that persist even when controlling for education and experience. For Black women, that number is significantly lower at 63 cents for every dollar a white worker earns.
This organized abandonment makes higher education one of the few available pathways to economic stability. But rather than publicly funding education as a social good, the government created a loan system that extracts wealth from the very communities it had already abandoned.
Disinvestment forces people to borrow. The debt becomes unmanageable because borrowers face the ongoing effects of that same abandonment—unemployment, low wages, unstable housing. Both Black and Hispanic borrowers are more likely to be first-generation college students navigating complex systems without the social capital and family support their White peers can access. They are more likely to hold high-interest consumer debts beyond their student loans—credit card debt, medical debt, even payday loans. They are more likely to provide financial support to family members while being less likely to receive such support themselves. They juggle unstable employment, volatile income, and the daily impossible math of deciding which bills to pay.
Default becomes inevitable for millions with a punishment system working to generate revenue from these communities that have nothing left to give. As Gilmore argues, organized abandonment necessitates organized violence to manage surplus populations, in other words, people rendered economically “unproductive” by capitalism itself. The student debt crisis creates millions of surplus people trapped in default, and wage garnishment is the organized violence deployed to manage them.
This then becomes not a collections system, but rather a punishment regime. And it punishes hardest those who were already struggling the most.
Sociologist Mathew Desmond says it best when he notes that “Poverty is the feeling that your government is against you, not for you; that your country was designed to serve other people and that you are fated to be managed and processed, roughed up and handcuffed.”
When the government begins taking money directly from your paycheck—before you ever see it, without your consent, with no consideration of whether you can afford to eat that week—it sends a clear message about whose interests matter.
Advocates are clear about what this represents. “At a time when families across the country are struggling with stagnant wages and an affordability crisis, this Administration’s decision to garnish wages from defaulted student loan borrowers is cruel, unnecessary, and irresponsible,” said Persis Yu of Protect Borrowers.
Julie Margetta Morgan, former deputy undersecretary at the Education Department, was even more direct: “Families are being forced to choose between paying their bills and putting food on the table. The Trump administration’s decision to begin garnishing wages takes even that meager choice away.”
The Trump administration frames wage garnishment as a return to normal collections after pandemic relief. But there was nothing normal about the system before the pandemic, and there is nothing normal about returning to it now. Student loan debt totals approximately $1.8 trillion held by about 43 million borrowers. When payments resumed in October 2023 after the pandemic pause, only one-third of borrowers who should have been making payments actually were. More than 9 percent of student debt was already more than 90 days delinquent or in default by September. These numbers will only grow.
The choice to resume seizing wages, tax refunds, and Social Security checks from millions of struggling borrowers is a choice to prioritize debt collection over human welfare. To punish poverty rather than address it. To extract from communities that have already been systematically exploited and denied. It will push thousands of families deeper into financial crisis while doing little to reduce the outstanding debt. Because people who cannot afford to eat cannot afford to repay their loans either.
Mustafa Ali-Smith is a social justice advocate who has worked around criminal justice issues for several years. His work examines race, justice, and the politics of reform and power in America.