The Department of Education said Friday it will temporarily delay forced collections on federal student loans. The pause applies to collection efforts such as Administrative Wage Garnishment and the Treasury Offset Program.
“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," said Under Secretary of Education Nicholas Kent.
Friday’s announcement appears to mark a reversal in policy. The department began sending wage garnishment notices earlier this month, the first step in a process that could have automatically deducted up to 15% of a borrower’s paycheck. About 1,000 notices had been sent to borrowers in default, representing a small fraction of the more than 5 million borrowers who have defaulted on their federal student loans.
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Officials said the delay will give the department time to implement new repayment rules under the Working Families Tax Cuts Act and allow borrowers more time to evaluate their options.
Under the law, the federal student loan system will be streamlined by reducing the number of repayment plans and limiting choices to either a standard repayment plan or an income-driven repayment plan. A new income-driven option, set to launch July 1, 2026, will waive unpaid interest for borrowers who make on-time payments that do not fully cover accrued interest. In some cases, the Education Department will also make small matching payments to help reduce loan balances.
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The legislation also gives borrowers a second opportunity to rehabilitate a defaulted federal student loan, a step previously allowed only once.
In the meantime, the department said borrowers in default should continue working with their loan servicers to resolve their loans. Officials noted that student loan defaults will still be reported to credit reporting agencies and may negatively affect borrowers’ credit scores.
