What Is Wage Garnishment Rising From Student Loans — And Can SoFi Be A Likely Beneficiary?

• Garnishment of wages builds on the U.S. government’s power to stop paychecks and seize federal tax refunds if someone fails to pay back federal debts.
• Last year, the Trump Administration’s OBBBA passed through the Senate on July 1, restricting federal borrowing for graduate and professional students.
• JPMorgan estimated that a 10 percentage-point increase in SoFi's market share from the OBBBA could drive an additional $1.4 billion in student loan origination volume.

The U.S. Department of Education decided in December that it would begin seizing the wages of borrowers who have been unable to repay their student loans, and with January underway, that reality is fast approaching for many.

Last year, the Trump Administration’s “One Big Beautiful Bill” Act (OBBBA) passed the Senate on July 1, limiting federal borrowing for graduate and professional students. Many borrowers have struggled to repay their loans due to a weak job market and heightened economic uncertainty.

Wall Street analysts and investors had anticipated that this move could benefit companies like SoFi Technologies, which offer private student loans and could see growth in earnings as a result.

A bullish user on Stocktwits said that SoFi is considered "safer" by many analysts because its revenue is diversified across lending and student loans.

Garnishment Of Wages

Garnishment of wages builds on the U.S. government’s power to stop paychecks and seize federal tax refunds if someone fails to pay back federal debts. According to CNBC, around 1,000 students who have borrowed loans and failed to repay them will receive notices of administrative wage garnishment.

In May, the U.S. Department of Education announced its Office of Federal Student Aid would resume collections of its defaulted federal student loan portfolio. The Department has not collected on defaulted loans since March 2020. 

As of April last year, the department noted that 42.7 million borrowers owed more than $1.6 trillion in student debt. More than 5 million borrowers have not made a monthly payment for over 360 days and are in default, with many in default for more than seven years.

The education department had anticipated that there could be almost 10 million borrowers eventually, and that would lead to almost 25% of the federal student loan portfolio being in default. 

Wall Street View

JPMorgan estimated that a 10 percentage-point increase in SoFi's market share from the OBBBA could drive an additional $1.4 billion in student loan origination volume, potentially yielding up to $70 million in incremental annual origination fees and $200 million in gross interest income.

This, along with a possible inclusion in the S&P 500 Index and expansions to give expanded access to alternative investments to include new private market funds from asset management firms, including Cashmere, Fundrise and Liberty Street Advisors.

Bank of America on Wednesday resumed coverage of SoFi Technologies with an ‘Underperform’ rating and $20.50 price target, according to The Fly. The firm said that SoFi raised $1.7 billion in capital in the third quarter of 2025 through an equity offering and completed its second capital raise of the year in December, totaling $1.5 billion.

The brokerage said that it views the capital raise as a "modest positive" as it provides ammunition to power continued growth.

How Are Stocktwits Users Reacting?

Retail sentiment on SoFi jumped to ‘extremely bullish’ from ‘bearish’ a week ago, with message volumes at ‘extremely high’ levels, according to data from Stocktwits.

While sentiment on peer fintech firms such as PayPal was in the ‘bearish’ territory, compared to ‘neutral’ a day ago, and on Affirm, retail sentiment was in the ‘neutral’ territory compared to ‘bearish’ a day ago.

Shares of SoFi have gained nearly 86% while PayPal stock has declined 33% and Affirm has gained over 41% in the last 12 months.

For updates and corrections, email newsroom[at]stocktwits[dot]com.

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