Education Department Delays Aggressive Student Loan Collections

The Education Department has temporarily paused aggressive collection efforts on defaulted federal student loans, including wage garnishments and seizure of tax refunds and some federal benefits.​

What is being delayed?

• Involuntary collections such as Administrative Wage Garnishment (taking money directly from paychecks) are on hold.​

• Seizures of federal payments through the Treasury Offset Program, including tax refunds and certain federal benefits, are also paused.​

Why is this happening?

• The pause is meant to give time to implement new repayment reforms authorized under the Working Families Tax Cuts Act (also referred to in some coverage as part of Trump’s “big beautiful bill”).​

• These reforms aim to simplify repayment plans and offer defaulted borrowers more options, including an additional chance to rehabilitate their loans.​

Who is affected?

• Borrowers with federal student loans in default who were at risk of wage garnishment or having tax refunds and federal benefits intercepted are directly affected.​

• Tens of millions hold federal student debt overall, with several million currently in default and previously facing renewed collection efforts after pandemic-era pauses ended.​

How long will the pause last?

• The Department has not set a new date for when involuntary collections will resume, describing the pause as temporary but open-ended while reforms are rolled out.​

• New repayment options, including a revised income-driven plan, are expected to be available around July 1, 2026, and the pause is intended to give borrowers time to evaluate and enter these plans.​

What should borrowers in default do now?

• Use this breathing room to contact the default loan servicer and explore options such as consolidation, rehabilitation, or enrolling in upcoming income-driven repayment plans once available.​

• Because credit reporting on defaults continues, resolving default status as soon as possible can help limit further damage to credit profiles.​