WASHINGTON – In a recent policy shift, the Trump administration has decided to postpone its plans to deduct wages from student loan borrowers who are in default, easing potential financial strain on countless Americans.
The Education Department revealed on Friday that it will continue to suspend involuntary collections on federal student loans while it works on developing new repayment strategies. This decision marks a departure from previous intentions to resume wage garnishments this month, which had been paused during the pandemic.
Nicholas Kent, who leads higher education at the department, emphasized the agency’s dedication to assisting student and parent borrowers in returning to regular, timely payments with more transparent and affordable options.
“The Department has concluded that involuntary collection processes like Administrative Wage Garnishment and the Treasury Offset Program will operate more effectively and equitably after the Trump Administration introduces significant reforms to our flawed student loan framework,” Kent stated.
Borrowers of federal student loans face the risk of wage garnishment and the withholding of federal tax refunds if they default, defined as being over 270 days late on payments. These penalties had been paused under a pandemic-era reprieve, which the Trump administration had lifted.
Earlier in the year, Trump officials signaled an intention to resume seizing tax refunds from defaulting borrowers. By December, they announced plans to restart wage garnishment in January, beginning with initial notifications sent to 1,000 borrowers during the week of January 7.
Both penalties — withholding wages and federal payments — are being paused, according to the Friday announcement.
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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