At a Glance
- The Education Department has paused all involuntary collections on federal student loans.
- Wage garnishment and tax-refund seizures will not restart as previously planned.
- More than 5 million borrowers are in default, with millions more at risk.
- Why it matters: Borrowers gain breathing room while new repayment options roll out July 1.
The Trump administration has reversed its plan to resume wage garnishment and tax-refund seizures from federal student-loan borrowers in default, leaving the pandemic-era freeze on involuntary collections in place indefinitely.
Collections Halted Again
Friday’s announcement scraps a December pledge to restart wage garnishment in January. The department had already sent initial notices to 1,000 borrowers the week of Jan. 7, but those actions are now on hold.
Nicholas Kent, the department’s higher education chief, said the delay will continue “as the agency finalizes new repayment plans.”
> “The Department determined that involuntary collection efforts such as Administrative Wage Garnishment and the Treasury Offset Program will function more efficiently and fairly after the Trump Administration implements significant improvements to our broken student loan system,” Kent said in a statement.
Borrowers who are at least 270 days behind on payments can normally have:
- Up to 15% of disposable wages seized
- Federal tax refunds withheld
- Social Security benefits offset
All penalties remain suspended. No new restart date has been set.
Scope of the Default Problem
Department data show:
| Metric | Count |
|---|---|
| Borrowers in default (Sept. 2024) | 5 million |
| Borrowers behind on payments | Millions more |
| At risk of entering default this year | Millions more |
The administration had planned to target tax refunds last spring and wages this winter. Both moves are now frozen.
New Repayment Options Coming
Congress last year ordered a streamlined menu of repayment plans. Starting July 1, borrowers will choose between:
- A standard 10-year fixed plan
- An income-driven plan that caps payments at a share of discretionary income
The department says the delay gives borrowers time to evaluate the new options before collections resume.
SAVE Plan Scrapped
Last month the department eliminated the SAVE Plan, an income-driven option created under former President Biden that offered:
- Lower monthly payments
- Quicker loan-forgiveness timelines
- Automatic enrollment for some borrowers
A federal judge had blocked SAVE after Missouri and other states sued.
Advocate Reaction
Student-loan advocates praised the pause. Aissa Canchola Bañez, policy director at the nonprofit Protect Borrowers, warned that garnishment would have:
- Pushed nearly 9 million defaulted borrowers deeper into debt
- Clashed with rising costs for child care, housing, and daily expenses
> “The administration’s plans would have been economically reckless,” Bañola Bañez said.
What Happens Next
- The department will finalize the new repayment structure
- Borrowers can enroll in the two new plans starting July 1
- Involuntary collections will resume only after “significant improvements” are implemented
- No timeline has been given for those improvements
Key Takeaways
- Wage garnishment and tax-refund seizures remain frozen
- 5 million defaulted borrowers avoid immediate financial pain
- New, simpler repayment plans arrive July 1
- The administration has not said when collections will restart
