Education Department delays plan to garnish wages of those with defaulted student loans
The U.S. Department of Education is delaying wage garnishments and involuntary collections for defaulted student loan borrowers, according to a release from the agency on Friday. The Department said its temporary pause was made to continue streamlining the student loan repayment process as it continues to make "major" reforms.
"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," Under Secretary of Education Nicholas Kent said in a statement.
This move, for now, gives breathing room to millions of Americans who have struggled to pay back their loans. In addition to garnishments and collections, the Education Department said tax refund seizures from the Treasury Department are also being paused.
Labeling the move as a "ridiculous" and "incoherent" political giveaway, the Committee for a Responsible Federal Budget (CRFB) accused the Trump administration of "reviving and extending" pandemic-era student loan pauses that it had vowed to end.
"We're not in a pandemic or financial crisis or deep recession," CRFB President Maya MacGuineas wrote in a statement. "There's no justification for emergency action on student debt, and no good reason for the President to back down on efforts to actually begin collecting debt payments again," she wrote.
The nonpartisan nonprofit organization, which acts as an independent source of objective policy analysis on issues of fiscal policy impact, alleges the U.S. could lose up to $5 billion per year in collection and lead loan balances to balloon.
Around 5 million borrowers have defaulted on student loan payments, which means they haven't paid their debts for at least nine months or 270 days. When the loan officially enters default, it becomes eligible for mandatory collections.
In a letter earlier this month, a coalition of advocacy groups, including Protect Borrowers, demanded the agency halt forced collections on defaulted borrowers.
Aissa Canchola Bañez, policy director at Protect Borrowers, said the administration's plans would have been "economically reckless" amid concerns about affordability.
Wage garnishment, a legal procedure in which a person's earnings are required by court order to be withheld by an employer for the payment of a debt, was scheduled to start for defaulted borrowers last week.
Collections announcements were made last year after a five-year pandemic pause. Education Secretary Linda McMahon has told reporters that the department collected roughly $500 million from defaulted borrowers before the new pause on Friday.
The announcement Friday came after McMahon said the wage garnishments had been "put on pause for a bit" during a press conference earlier this week on her Returning Education to the States tour.
Under the Working Families Tax Cuts Act, a new income-driven repayment plan will be made available for borrowers on July 1, 2026 after the administration moved to terminate Biden-era plans.
The department said its decision Friday will give defaulted borrowers time to rehabilitate their loans in the meantime.
Kristin McGuire, president and CEO of the Young Invincibles, a national advocacy and policy nonprofit organization, called the temporary pause the "bare minimum."
"Rather than pushing millions of borrowers further into debt, it is essential that the Administration and the Department of Education work toward solutions that recognize student debt as part of a larger affordability crisis facing our nation's young people," McGuire wrote in a statement, adding "The future success of our country relies on young people to invest in their communities, not forcing them into cycles of financial distress."
As McMahon works to dismantle the agency she leads, she is also eyeing the Treasury Department as a potential landing spot for the student loan portfolio.
Last fall, Ellen Keast, Department of Education press secretary for higher education, told ABC News, "We are evaluating ways to improve the fiscal health of the nearly $1.7 trillion student loan portfolio to safeguard the interests of both students and taxpayers."
