The department pauses involuntary collections
The Trump administration is delaying its plans to withhold wages and federal payments from some federal student loan borrowers who default, the U.S. Department of Education said Friday.
The department said involuntary collections on federal student loans will remain on hold as the agency finalizes new repayment plans scheduled to be available starting July 1. The shift reverses earlier plans to restart wage garnishments this month after a pandemic-era pause.
Kent says the change is about timing and improvements
Nicholas Kent, the Education Department’s higher education chief, said the agency is “committed to helping student and parent borrowers resume regular, on-time repayment, with more clear and affordable options.”
Kent also said 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 the student loan system.
What happens to borrowers in default
Federal student loan borrowers can have their wages garnished and their federal tax refunds withheld if they default, which the department’s description tied to being at least 270 days behind on payments. The penalties had been put on hold during the pandemic-era pause on student loan payments that the Trump administration lifted.
Friday’s announcement paused both penalties.
Prior plans for January garnishment
The department’s decision came after earlier signals from Trump officials. Last spring, officials said they would resume targeting tax refunds for borrowers in default. In December, officials said they would restart wage garnishment in January, with initial notices being sent to 1,000 borrowers the week of Jan. 7.
How many people are behind
The department said more than 5 million Americans were in default on their federal student loans as of September, according to department data. It also said millions more have fallen behind and are at risk of going into default this year.
The department did not set a new date for involuntary collections, saying the delay will give borrowers time to evaluate new repayment plans.
Advocates welcome the pause
Student loan advocates welcomed the Friday announcement, which they had urged the department to follow rather than resuming wage garnishment. Aissa Canchola Bañez, policy director at the nonprofit Protect Borrowers, said the administration’s plans would have been “economically reckless” and would have risked pushing nearly 9 million defaulted borrowers even further into debt.
Congress ordered repayment changes
Congress last year ordered the Education Department to overhaul repayment plans that critics said had become too confusing. The new options for new borrowers will include a standard plan and a plan that lowers payments based on the borrower’s income.
The Education Department also scrapped the SAVE Plan, which was created under former President Joe Biden, after it was blocked by a federal judge in a case brought by Missouri and other states.