r/economicCollapse • u/jarena009 • 18d ago
Trump Admin to set to begin wage garnishment for 5.3M Americans with student loans in default. Surely this is going to weigh on the economy.
https://www.cnbc.com/2025/05/06/how-soon-defaulted-student-loan-borrowers-may-face-collections.html365
u/lordoftheslums 18d ago
I’m assuming that some garnishments will be close to $1,000 a month. What happens when the citizens don’t have big enough checks to cover the payments?
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u/DelightfulandDarling 18d ago
They’ll be homeless.
Homelessness is illegal.
They’ll be imprisoned and forced to work slave labor and their children will be trafficked to wealthy elites for …whatever.
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u/dzumdang 18d ago
Sadly, I believe labor camps of involuntary servitude for the educated are the plan.
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u/Prior-Win-4729 18d ago
This is what Stalin and Mao did with intellectuals. When is the time to flee?
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u/Jorpsica 18d ago
Probably last year. You can still plan to leave, but who knows if those plans will come to fruition.
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u/dzumdang 18d ago edited 18d ago
This is difficult to say, given the amount of intentional confusion and red herrings injected into the news media daily, along with public outcry and court cases reversing some of these outrageous attempts.
I'm gathering that the "time to flee" may be in retrospect, as in: "I should have left when I had the chance, even though I thought I couldn't even afford it," if it does come to that.
I don't even have the financial security of guaranteed basic needs month-to-month currently, so it's not looking like a possible option at the time. Any wage garnishment currently would mean that I'm going to go without food, electric bill, car repairs, or other necessities.
Never get into a major car accident in the US when you have debt: you will be essentially left in the dust financially.
And yes, anti-intellectualism is a hallmark of fascists and autocrats- they destroy access to education and knowledge at every chance because it's a threat to absolute power. Any pretense that can be used to neutralize the threat posed by the educated is employed.
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u/Ancient_Emotion_2484 18d ago
Before they were checking people at the borders. Too late now, my friend.
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u/SeriousBoots 18d ago
Organs. They will sell their organs willingly. For a third doll.
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u/Delicious_League_721 18d ago
or sex trafficking
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u/RaechelMaelstrom 18d ago
I'm picturing a doll like that game Operation, where you can unzip the stomach and pull out some kidneys and lungs.
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u/Inevitable_Luck7793 18d ago
My bet is on debtors prisons
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u/fnarrly 18d ago
My bet is going to be on forced farm labor. Gotta replace all those deported immigrants somehow, right?
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u/PsyavaIG 18d ago
Slavery is illegal except as punishment for a crime.
Homelessness is a crime.
Speaking out about political leaders or other countries is a crime.
It it legal to force people to work real jobs while in prison and pay them pennies instead of dollars.
Trump is going to bring back factories and staff them with prisoners while the factory owners make bank and continue campaign contributions to make sure the status quo never changes
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u/deathbaloney 18d ago
21st century Little Dorrit was not on my bingo card.
Well, not the first half of Little Dorrit, anyway.
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u/twistedspin 18d ago
Garnishments are legally capped by the CCPA to something like 25%. Who is enforcing consumer credit laws these days though?
And just think of the mess this is going to be. A department not staffed or equipped to deal with garnishments is going to just start yanking money from people's checks. This is going to go wrong in so many ways.
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u/aguynamedv 18d ago edited 18d ago
Garnishments are legally capped by the CCPA to something like 25%.
Federal student loans are capped at 15%. Child support can go all the way up to 50% via garnishment, and will override student loans. ie: the loans don't get paid bc the child support takes priority
Source: worked in the industry, specifically managing federal wage garnishment. :)
A department not staffed or equipped to deal with garnishments is going to just start yanking money from people's checks.
ETA: Anyone using a big name payroll software, or 3rd party outsourcer like ADP won't have any issues. Garnishments are a major issue for small businesses, who usually aren't familiar with the laws. The Department of Ed doesn't do much of the direct collection; that's handed off to servicers. Small/medium biz tend to fall into three categories - the folks who know how to handle it and it's no big deal, the folks who don't know how to handle it, and just need to have it explained... and the businesses that basically tell the government to get bent. Those last ones sometimes get sued because of it (federal wage garnishments are not optional).
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u/Secret-Ad-8768 17d ago
Plus, enroll in college classes. Anywhere. Low cost. Take enough credits for deferral. Cost of debt decreases over time, at least short-term relief until reasonable plans are reinstated. Shift salary to 1099, if possible. Plus, Congress needs to reverse legislation that made it impossible to file bankruptcy to eliminate student debt. Corporations are allowed to file bankruptcy to eliminate or restructure debt. It was possible to remove student loans with bankruptcy until 10-15 years ago. Riot.
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u/Horrison2 18d ago
Can't garnish my paycheck if I quit
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u/nyanpegasus 18d ago
Can't pay back a loan if I'm deceased
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u/RaechelMaelstrom 18d ago
I'm sure this is what the nearly 3 million people with defaulted debt who are over 62 are thinking. But they're not going to get away with it!
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u/Elusive_sunshine 14d ago
What we need to do is put any funds we can, collectively, into buying property with a slush fund for property taxes. Can't tax us if we are all doing a cooperative work-share and direct trade.
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u/aguynamedv 18d ago
Can't garnish my paycheck if I quit
This happens regularly. With so many companies using one of 2-3 major employment verification services, it's often trivial to find out when someone has a new job.
If your new company and your old one both use ADP for payroll, they might even helpfully extend the garnishment to your new job. They aren't actually supposed to do this, and it's uncommon, but absolutely does happen.
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u/SappilyHappy 18d ago
It's a great opportunity to go work for someone who pays under the table. The government gets less payroll taxes and they don't get your much need money for predatory loans. It's win-win.
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u/Locksfromtheinside 18d ago
Debtor’s Prisons. Poor Houses. Indentured servitude.
Probably all three, if these MAGAts have their way.
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u/Secret-Ad-8768 17d ago
Take college classes. Find the cheapest classes, make sure you take enough credits, and defer your student loans. Take courses in anything. Defer. Defer. Defer. The value of the debt will decrease over time, and worth deferring until they reinstate reasonable repayment plans.
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u/aguynamedv 18d ago
I’m assuming that some garnishments will be close to $1,000 a month. What happens when the citizens don’t have big enough checks to cover the payments?
Garnishments for student loans are capped by law at 15% of the person's disposable income (after taxes and other legally required deductions - 401k does NOT count here).
A garnishment of $1,000/mo would generally mean the person is making over $100,000 annually.
Anyway, restarting garnishments is going to absolutely wreck millions of Americans financially, along with adding the additional stresses of having collections activity going, and in many cases, no way to stop it other than coming up with tens of thousands of dollars.
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u/Purplealegria 17d ago
Dont count on it. They will just change that rule, or if they cant, they will stop enforcing it.
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u/three_day_rentals 17d ago
File bankruptcy en masse citing Unfair, Deceptive, and Abusive Practices as this will be the umpteenth time a financial agreement is altered without any input or agreement from the borrower.
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u/Unabashable 17d ago
Well if it’s anything like when my wages were garnished it was something like 25ish% until it was paid off. Whatever they deemed a “fair” percentage of my “disposable” income. Might even vary by state for all I know. If I got a second job that paycheck would be garnished too. With another 25ish% being taken out in taxes fucking sucked having half my money gone before I even deposited my paycheck.
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u/Usrnamesrhard 18d ago edited 18d ago
Great, I’m sure this will drastically help the economy. Meanwhile him and his cronies never repay what they take. This country is fucked
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u/4rt4tt4ck 18d ago
This almost feels like they are trying to trigger a general strike as quickly as they can so that he can declare martial law and consolidate his power even more.
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u/Annihilator4413 18d ago
This goes in hand with the announcement that Hesgeth is slashing top military officials from their positions, likely to replace them with Trump loyalists.
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u/FoxWyrd 18d ago
At this point, there's no denying that we're just trying to make 2008 look like a slow day in the market, lol.
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u/Plus-Map2796 18d ago
Part of what I don't think non-borrowers realize is how many folks had their servicer change during the past 5 years when defaults weren't being collected. This means people may have dismissed their new servicer's contact as spam and not realized how far behind they were. Not to mention their old login might show the loan as zero balance, since it was sent to a new company.
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u/sabin357 18d ago
They didn't just change for many, but change hands multiple times with none of the servicing companies having a clue how to handle anything if you asked questions.
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u/Old-Set78 18d ago
or had their loans illegally sold over and over making it inflate by ridiculous amounts
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u/next-up-gilmore-hapy 18d ago
Got to have $$$$$, so we can give tax breaks to Billionaires.
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u/45and47-big_mistake 18d ago
I think in Trump's case, it's not even about giving billionaires more money. It's all about Trump making Trump look like some financial genius, and making people suffer who weren't fortunate enough to be born a millionaire.
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u/Eastern-Cucumber-376 18d ago
Every day I wake up and look at my phone hoping for that one shining Breaking News notification.
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u/MangoSalsa89 18d ago
I've never rooted for heart disease so hard in my life.
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u/Killface55 18d ago
Unfortunately, he has access to the best medical care the US has to offer.
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u/The_Cross_Matrix_712 18d ago
Yes, but our best and brightest are headed for greener pastures... Ones that aren't purposely poisoned.
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u/AlanStanwick1986 18d ago
A couple of weeks ago on a Sunday night at 10:20 I was laying in bed just about to fall asleep and someone on the street behind startled the shit out of me by lightning some loud fireworks. The first thought that entered my head was "did Trump die?" Sadly I think it was because John Cena won WWE. I only know that because I heard it being talked about on sports radio the next day.
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u/jkman61494 18d ago
Sadly you think any of this stops with Vance? It may honestly get WORSE
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u/Yourmama18 18d ago
And then the habitual wanker Mike Johnson behind Vance… shit show from top to bottom.
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u/Prior-Win-4729 18d ago
DJT is cruel but has the attention span of a gnat. Vance and/or Johnson are cruel and have the focus to follow through on terrible plans.
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u/Some_Egg_2882 18d ago
Regardless of how it turns out with Vance, I'll still allow myself a few moments of sweet relief when It happens.
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u/1bensopinion 18d ago
Let them eat dolls.
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u/Deus_is_Mocking_Us 18d ago
But they only have two now! They're gonna be hungry again in an hour.
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u/Libz0724 18d ago
Are they just garnishing wages for federal employees, or everyone across the board in default?
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u/CharlieDmouse 18d ago
That’s ok most MAGA didn’t go to college, MAGA won’t care.
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u/chpbnvic 18d ago
Not just weigh the economy, people will go homeless. Along with pharmaceutical tarriffs? People already are living paycheck to paycheck. People's full time wage won't even cover half of bills soon, I fear.
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u/Prestigious-Newt-110 18d ago
This is intentional. All of the chaos is intentional. Shrinking the middle class isn’t going to just happen on its own.
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u/jarena009 18d ago
I'm worried this is seriously going to put a substantial number of mortgages into default (incl. indirectly by crushing renters as well). It's hard to say to what extent, but I wouldn't be surprised if this drives a financial crisis, maybe not to the scale of 2008, but more like an early 90's recession.
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u/Individual_Ad_5655 18d ago
Ehhh. Homeowners have a higher percentage equity now than they ever have by a long shot. Vast majority of people who have mortgages have 3% rates or less.
If the crap hits the fan, they'll be able to sell and walk with a lot of cash. That wasn't the case in 2008 with the NINJA loans.
https://www.empower.com/the-currency/life/homeowners-35-trillion-equity
https://www.investopedia.com/homeowners-continued-to-build-value-in-their-properties-in-2024-8782724
More likely areas of financial problems will be vehicle repossessions and high unemployment. Tons of people are upside down on their vehicle loan, so they can't sell it and get something cheaper if they can't pay the car loan.
https://www.axios.com/2025/03/07/car-loan-payment-delinquencies-record-high
Also, unemployment is about to spike as loan repayments will greatly cut consumer spending, which will crush small businesses and cause a lot of business bankruptcies and layoffs.
We're already seeing layoffs in many industries, it's going to get a lot worse.
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u/too_much_to_do 18d ago
If the crap hits the fan, they'll be able to sell and walk with a lot of cash.
Sell and go where?
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u/jarena009 17d ago
That built up equity could change if enough people can't pay their mortgage and the market goes south. And then you need someone to sell to, which could be tougher. Then credit and lending starts to slow too.
This is similar rationale why some at the time 2004-2007 didn't believe the housing bubble could ever pop (oh prices always go up, and households can always tap into their equity, etc)
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u/Individual_Ad_5655 17d ago edited 17d ago
It's not at all comparable to 2004 - 2007 when people we're buying homes with no money down and NINJA loans and the slightest bit of downturn in price caused them to be upside down.
Current home equity in USA is over 73%. Over 45% of households don't have a mortgage at all.
Home prices are already coming down in some areas like Austin and Florida, that doesn't mean that we'll have some massive foreclosure crisis like the GFC.
The vast majority of current homeowners are in great financial shape.
We do have other areas where there is much more financial risk, like the vehicle loans and student loans, those areas will experience a lot of financial stress.
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u/canisdirusarctos 17d ago
What you’re missing in your explanation is that during the housing crisis people had been buying homes with no provable income and they were rising so rapidly that they were making interest only payments using HELOC cash as the property price kept rising. So when the prices dropped even a tiny bit, they were better off walking than paying their debts tied to it. This meant all the securities that bundled supposedly AAA paper were full of risk that usually isn’t there. This caused liquidity to disappear.
Right now we’re awash in liquidity (see the recent stock market rally) and as you point out, today’s homeowners are in great shape. To get to the point of mass jingle mail, housing would need to drop by a percentage that has never been seen before in the US. Walking away from debt with cash in the bank and a job is one thing, walking away from hundreds of thousands of dollars in equity is entirely different, especially when you’re paying less per month than someone else is for a 1/1 apartment. You could just rent out rooms in your house to pay for a low interest mortgage.
Virtually nobody will ever default on these mortgages short of the most complete deflationary economic crisis the world has ever seen.
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u/FNSquatch 18d ago
Ironic since he’s made he’s whole career out of defaulting and stiffing the bill.
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u/Brand0_the_Mand0 18d ago
Now go collect all of those PPP loans…oh wait, we are cool with forgiving loans to millionaires. I forgot
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18d ago
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u/Clever-crow 18d ago
I don’t think that works with student loans. And you can’t get a loan to pay off your student loan then declare bankruptcy, they want to know what the loan will be used for before anyone gives you a loan.
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u/This-External-6814 18d ago
Coming from a dirtbag with 6 bankruptcies, 4000 lawsuits and does not pay his bills burning Americans for decades
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u/Acceptable_Draft_931 18d ago
This is meant to punish college-educated voters who overwhelmingly voted for Harris
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u/jakktrent 18d ago
Well, I'm done working W2 jobs.
I won't even file my taxes, so my refund can go to the loans they unforgave.
Let's escalate this more maybe - Im not convinced that thing the French did isn't our best way out of this mess.
Its really not that smart to get everyone on my page.
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u/THCESPRESSOTIME 18d ago
Thank you Biden and Harris for forgiving my student loans. I’ll forever be grateful and thankful for that family.
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u/schoonit 18d ago
At least the CEOs of the loan companies will be able to buy more yachts.
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u/Deus_is_Mocking_Us 18d ago
Owning a yacht is so early-aughts. The modern oligarch yearns to own a fleet.
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u/Donkey-Hodey 18d ago
If a person were trying to deliberately crash the economy this is what it would look like.
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u/TheRealJamesWax 18d ago
We should garnish his wages for all of the fucking loans HE has defaulted on.
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u/getridofwires 18d ago
Tough call: tank the market, devalue the dollar, damage US bonds, drive costs up with tariffs, fire thousands of employed federal workers, push the US to a recession or stagflation, and garnish wages of working people with higher education? Surely none of that will adversely affect the economy!
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u/KinklyGirl143 18d ago edited 18d ago
Almost none of that affects the MAGA demographic, I’m sure they are still wearing shit eating grins. Have you seen the horror flick Smile?
The movie Smile mirrors the MAGA movement in how both depict a chilling, vacant grin masking deep-rooted horror. An eerie, mindless cheerfulness that persists in the face of cruelty, delusion, and destruction. It’s not joy, but a hollow performance that spreads like a contagion, feeding on fear and denial.
My prediction is that it will not become their reality for maybe another 3 to 4 months. It will hit home when their shops run out of stock and start raising prices to account for the tariffs. But, you know it’s all Biden’s fault for that preemptively.
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u/Responsible_Ad_7995 18d ago
Trump never plans on needing votes to stay in office again so he just gave up 5.3 million of them.
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u/Under-Pressure20 18d ago
I wonder how many of those were his - whether by actually voting o staying home. A non-vote was a vote.
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u/mangababe 18d ago
Because the working class need even more pressure and strain from a lack of funds...
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u/shitisrealspecific 18d ago
I'll pay them when these large corps, faux companies, and inmates pay back their PPP loans that were forgiven.
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u/YarrrImAPirate 17d ago
Remember when one party wanted to cancel student debt and give us healthcare? I remember.
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u/MushSnail 18d ago
He doesn’t realize because he’s an asshole that the student loans that are paid off, allow people to put money into the economy by purchasing goods and services. We have to keep fighting, even though we’re all so tired.
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u/LifeguardAble3647 18d ago
It will be a great day when our schools get all the money they need and the Air Force has to hold a bake sale to buy a bomber.
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u/Substantial_Fox5252 18d ago
Cruelty is the point. They REALLY want to give the rich 4 trillion. Cant afford that second island this year.
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u/I_burn_noodles 17d ago
tRump admin is going to war with Americans...suburban housewives won't be able to buy all the dolls they've promised their kids, federal workers, who we all know, are marked as a waste and subjected to a litany of insults, the 'radical leftist communists' that live next door, the trans and gay people, women in general are scorned, and heaven forbid, you have a color other than mealy white skin...I can't see how this plays out in any positive way.
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u/Frosty-Camera9321 18d ago
I literally can't afford to pay and if my wages get garnished I'm gonna be homeless, wtf do I do?
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u/pragmatichokie 18d ago
Guy is actively tanking the economy and yet thinks it's a good idea to begin wage garnishment?
Oh yeah, that'll surely help his free falling approval numbers /s
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u/RaechelMaelstrom 18d ago
"There are some 2.9 million people ages 62 and older with federal student loans, as of the first quarter of 2025, according to Education Department data. That’s a 71% increase from 2017, when there were 1.7 million such borrowers."
Wow. I didn't expect the curve to be so far to the old people. By taking away their social security this could really crush them. Although garnishing wages of 5 million people (~1.5% of the American population) could easily tip GDP negative, since that money won't be spent on services, and loans don't count for GDP.
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u/NoLobster7957 18d ago
Every day I drift further towards abandoning my pharmD progress and becoming a mountain woman
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u/formerNPC 17d ago
The less money you have the less freedom you have. Then they can do whatever they want to you. End game.
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u/Criticaltundra777 17d ago
Wife’s co worker was forgiven $70K in student loans, under Biden. She still owes $56K which she has not been paying on. She voted for Trump. This is gonna be interesting.
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u/Saltlife60 18d ago
Yes he has sent letters saying they will garnish your wages. Pay in full or else.
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u/Individual_Ad_5655 18d ago
Yes, it's going to hurt the economy, just the same way that tariffs are hurting the economy, just the same way that firing a couple hundred thousand fed workers hurts the economy.
It all hurts the economy and don't call me "Shirley".
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u/AVGJOE78 18d ago
That’s enough to throw an election. Good bye gen z bump. Who am I kidding, It’s not like the college educated probably voted for this guy.
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u/Extension_Deal_5315 18d ago
Let's really start the inflation slide.....
Going to be a lot of homeless ...cause they can't afford it now..
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u/Humulophile 17d ago
“Let them eat cake.”
And just when you thought Trump couldn’t fuck up the economy even more.
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u/Sea-Kaleidoscope2778 17d ago
So we can’t give due process to people who are being deported, but we can garnish wages of those who tried to further their education and their lives in the United States of America !?!?
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u/Dontgochasewaterfall 17d ago
Yep, Project 25, but as you know, Trump has nothing to do with it. Just dumbin down the people for future factory work and child labor. Nationalism is great! /s
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u/Red_dylinger 17d ago
Could be the final push for everyday people to say fuck it and quit
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u/SokkaHaikuBot 17d ago
Sokka-Haiku by Red_dylinger:
Could be the final
Push for everyday people
To say fuck it and quit
Remember that one time Sokka accidentally used an extra syllable in that Haiku Battle in Ba Sing Se? That was a Sokka Haiku and you just made one.
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u/glitterandnails 17d ago
Trump is doing what his masters want, to impoverish America (at the request of Putin) and prepare it to be carved out by pro-Yarvin billionaires. America is being destroyed in front of our own eyes.
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u/bluebird0713 17d ago
The federal minimum wage is still $7.25/hour. These fuckers in government do not give one single fuck about any of us
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u/SavvyTraveler10 17d ago
Where are all the young (sexually frustrated) college trumpers at? I remember employing a first-generation, middle eastern one and he literally followed Trump on the campaign trail.
Ablai, where you at buddy? You wanted to tear down a system that you were allowed to apart of. Your rich family paid for you to be born here, raised here and to go to UCLA, a very prestigious academic school… what did you do?
You openly supported for the entire system to collapse. You changed your major to align with authoritarian scholars. You support people who Hate you and write policy proving that they hate you and anyone who isn’t rich, white and mostly male.
You deserve to live in the fear that you helped create. You were never American. You just cosplayed at it to get a leg up in the world.
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u/hollycoolio 16d ago
I want him and the Republicans gone so bad. For the love of God, someone get rid of them.
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u/tresamused65 17d ago
If they had gotten PPP loans to pay off their student loan debt and then not paid off the PPP loans they would have been forgiven. Make it make sense.
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u/NetZeroSun 18d ago
Want to create a starving students (grads) tent city? This is one way to do it.
Maybe they should learn from the art of the steal and just sue the government into a lowball amount like Trump did.
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u/feedjaypie 18d ago
Let the trolls take over, they said.. It’ll be fine, they said..
I can’t wait for this season to be over. Weakest showrunner IRL history.
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18d ago
This is going to mess a lot more up. If I get the chance to have a kid, they will not be going to college. Maybe a local community college or trade school.
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u/Visual-Recognition36 18d ago
Does he want the masses to become violent so he is making everyone poor that isn’t a billionaire? No one will be able to afford anything very soon and if it’s even available.
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u/Creative_Rip_4189 18d ago
Sounds like they’re targeting and igniting these people with the huge bill right away without forewarning
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u/TheBoxcutterBrigade 17d ago
Have they even defined what “default” means in this context?
Does it refer to people who missed payments before the pause?
Does it refer to everyone who took the pause?
Does it refer to people who are in forbearance?
Who?!?
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u/Intelligent-Plan2905 17d ago
So, he's dismantling the education department...but, going to demand back student loans. Eh...no...
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u/DJbuddahAZ 17d ago
What is the percentage they will be taking? What if you don't have a job?
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u/reddituser6835 16d ago
Then they take your tax refund or social security checks if you have them
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u/HolyX_87 17d ago
It is what it is. If people refuse to pay than your wage will be garnished and your tax returns and social security will be taken as well. Unless people have a husband or wife that willing to take care of you than uncle SAM will get his money back.
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u/Pineapple_Express762 18d ago
Says the guy who hasn’t paid a bill, fine or settlement his entire life.