The department said the delay would give borrowers time to evaluate new repayment plans scheduled to be available starting July 1.
The Trump administration on Friday delayed plans to resume seizing wages and federal tax refunds from Americans who have defaulted on federal student loans, reversing course weeks after announcing it would restart collections this month following a pandemic-era pause. The Education Department said both administrative wage garnishment and withholding of federal payments through the Treasury Offset Program will remain on hold while the agency finalizes new repayment options.
The pause leaves collections suspended for more than 5 million borrowers already in default and extends a reprieve to millions more who have fallen behind on payments — while offering no new date for when involuntary collections will resume.
“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,” Nicholas Kent, the department’s higher education chief, said in a statement. Kent added the agency is “committed to helping student and parent borrowers resume regular, on-time repayment, with more clear and affordable options.”
The department said the delay would give borrowers time to evaluate new repayment plans scheduled to be available starting July 1. No new date for resuming involuntary collections was announced.
Borrowers who fall at least 270 days behind on payments are considered in default and become subject to wage garnishment and federal-payment seizure. Those penalties were suspended during the pandemic-era pause on student loan repayments.
Advocates welcome the shift
Student loan advocacy groups, which had urged the department not to restart wage garnishment, welcomed Friday’s announcement.
“The administration’s plans would have been economically reckless and would have risked pushing nearly 9 million defaulted borrowers even further into debt,” said Aissa Canchola Bañez, policy director at the nonprofit Protect Borrowers.
Prior signals pointed toward resumption
The announcement reverses a posture officials had maintained for months. Last spring, Trump administration officials said they would resume targeting tax refunds for borrowers in default. In December, they announced wage garnishment would restart in January, with initial notices to be sent to 1,000 borrowers during the week of Jan. 7. Friday’s announcement suspended both penalties.
New repayment framework taking shape
Congress last year ordered the department to overhaul its repayment structure, which critics said had grown too complex. Under the framework taking shape, new borrowers will have two options: a standard repayment plan and a plan that reduces payments based on the borrower’s income.
The Biden-era SAVE Plan, which offered lower monthly payments and an accelerated path to loan forgiveness, was scrapped after a federal judge blocked it following a legal challenge by Missouri and other states.