Trump administration delays plan to withhold wages for student loan
borrowers in default
[January 17, 2026]
By COLLIN BINKLEY
WASHINGTON (AP) — The Trump administration is delaying its plans to
withhold pay from student loan borrowers who default on their payments,
backing off a measure that threatened to deliver a financial blow to
millions of Americans.
The Education Department announced Friday involuntary collections on
federal student loans will remain on hold as the agency finalizes new
repayment plans. The shift reverses course on earlier plans to restart
wage garnishments this month after a pandemic-era pause.
Nicholas Kent, the 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.”
“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.
Federal student loan borrowers can have their wages garnished and their
federal tax refunds withheld if they default on their loans, meaning
they are at least 270 days behind on payments. The penalties were put on
hold during the pandemic-era pause on student loan payments that the
Trump administration lifted.
Last spring, Trump 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.
Both penalties — withholding wages and federal payments — are being
paused, according to the Friday announcement.
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More than 5 million Americans were in default on their federal student
loans as of September, according to department data. Millions more have
fallen behind on loan payments and are at risk of going into default
this year.
The department did not set a new date for involuntary collections. It
said the delay will give borrowers time to evaluate new repayment plans
that are scheduled to be available starting July 1.
Friday's announcement was welcomed by student loan advocates who urged
the department not to resume wage garnishment.
“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.
Congress last year ordered the department to overhaul repayment plans
that critics said had become too confusing. New borrowers will have two
options: a standard plan and a plan that lowers payments based on the
borrower’s income.
Last month the department scrapped the SAVE Plan, which was created
under former President Joe Biden and offered lower payments and a
quicker path to student loan forgiveness. The plan had been blocked by a
federal judge after Missouri and other states challenged it in court.
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