Education Department Delays Wage Garnishment for Defaulted Student Loans

The Trump administration has announced a delay in plans to withhold pay from student loan borrowers who have defaulted on their payments, reversing a measure that could have financially impacted millions of Americans. The U.S. Department of Education disclosed on Friday that involuntary collections on federal student loans will continue to be suspended as it works on new repayment plans.

Shift in Policy on Involuntary Collections

Nicholas Kent, the Education Department’s higher education chief, stated that the agency is “committed to helping student and parent borrowers resume regular, on-time repayment, with more clear and affordable options.” He noted that improvements to the existing student loan system are necessary for the effective implementation of collection efforts such as Administrative Wage Garnishment and the Treasury Offset Program.

Federal student loan borrowers can face serious penalties for defaulting on their loans, including wage garnishment and the withholding of federal tax refunds after being at least 270 days behind on payments. These penalties had been suspended during a pandemic-related pause that the administration subsequently lifted. While the administration had indicated plans to resume targeting tax refunds and restart wage garnishment this month, both efforts are now on hold.

Statistics on Borrower Defaults

More than 5 million Americans were reported to be in default on their federal student loans as of September, according to the Department’s statistics. Additionally, millions more have fallen behind on payments and are at risk of entering default. Recent data from the Federal Reserve Bank of New York highlights that nearly 10% of borrowers were delinquent for over 90 days as of the third quarter of 2025.

Payments on student loans had been paused from March 2020 to April 2023, followed by a start-year grace period designed to prevent borrowers from entering default if they missed payments. In a previous announcement made in May, the Education Department indicated that it would resume collection activities.

Reactions from Advocates and Future Plans

The announcement to delay involuntary collections has been met with approval from student loan advocates, who had urged the department to reconsider its plans. Aissa Canchola Bañez, policy director at the nonprofit Protect Borrowers, remarked that the administration’s previous plans would have been “economically reckless” and could have exacerbated the financial difficulties of nearly 9 million defaulted borrowers.

In a response to consumer concerns, Congress mandated the department last year to reform repayment plans, which many criticized as overly complicated. As part of the reforms, future borrowers will have access to two new repayment options: a standard plan and start that adjusts payments based on income. The department also recently scrapped the SAVE Plan, which had been introduced under former President Joe Biden and aimed to provide lower payments and expedited loan forgiveness. This plan was rendered ineffective following a ruling by a federal judge after it faced legal challenges from several states.

As the Education Department finalizes its plans, a new timeline for involuntary collections has not been established, though new repayment plans are expected to be available starting July 1.