Wages won’t be garnished for student loan borrowers in default, Trump administration says in policy reversal

In a reversal of recently announced policy, the Department of Education said Friday it was postponing the pursuit of garnishing wages, seizing tax refunds and collecting other benefits from federal student loan borrowers in default.

The department said in a statement that the delay in collections will allow defaulted borrowers more time to rehabilitate their loans and “enable the Department to implement major student loan repayment reforms” passed under last summer’s One Big Beautiful Bill Act.

President Donald Trump’s administration said in December that it was planning on garnishing wages beginning the week of Jan. 7. It’s not clear whether the department collected any wages since then.

Earlier this week, Education Secretary Linda McMahon told NBC 10 WJAR in Rhode Island that “there is a pause” on wage garnishing.

“During the previous administration I think the whole repayment of loan issue became just so confusing. People just stopped paying. They didn’t know if their loan was going to be forgiven or how much of it was going to be forgiven,” McMahon said.

“We just started collecting again to say, ‘You know you’re in default, you don’t want this on your credit score,'” she added.

McMahon said the department has now collected about $500 million from borrowers. The next “phase” would have been wage garnishment, she said.

McMahon did not say how long the pause on garnishment would last.

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The federal government stopped garnishing wages on defaulted federal loans in early 2020 as part of financial relief measures during the COVID pandemic. Former President Joe Biden extended a pause on federal student loan payments in October 2023. In May of last year, the Trump administration restarted required payments.

The One Big Beautiful Bill Act, passed by Congress in July, makes several changes to borrowing and repayment of federal student loans, including reducing the number of repayment plans, lowering caps on borrowing limits for some graduate students and implementing a new income-driven repayment plan.

Borrowers are considered delinquent when they miss a single payment, and are in default after 270 days, or about nine months, of non-payment. At this point, the federal government can garnish up to 15% of a borrower’s paycheck after deductions, and can withhold money from federal and state tax refunds, Social Security payments and other federal benefits..

Student loan expert Robert Farrington told PBS News that making even one payment will pull a borrower out of default and reset the nine-month clock.

Student loan advocates applauded the government’s announced pause on wage garnishments.

“Amidst the growing affordability crisis, the [Trump administration’s] plans would have been economically reckless and would have risked pushing nearly 9 million defaulted borrowers even further into debt,” Aissa Canchola Bañez, policy director at Protect Borrowers, said in a statement.

But others said the government’s move is financially irresponsible.

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said in a statement that “not only will it increase costs to the taxpayer, but it will also actually worsen affordability challenges by allowing student loan burdens to balloon and putting upward pressure on interest rates and inflation.”