Education Department Pauses Wage Garnishment and Treasury Offsets for Defaulted Student Loans

The Education Department announced Friday that it will pause plans to restart involuntary collections — including Administrative Wage Garnishment and Treasury Offset Program actions — for federal student loan borrowers in default while the agency finalizes new repayment options.

The move reverses an earlier timeline that had aimed to resume garnishments in January after a pandemic-era pause on payments was lifted. The department said the delay will give borrowers time to evaluate redesigned repayment plans scheduled to be available starting July 1.

What the Department Said

"We are committed to helping student and parent borrowers resume regular, on-time repayment, with clearer and more affordable options," said Nicholas Kent, the department's higher education chief. "Involuntary collection efforts such as Administrative Wage Garnishment and the Treasury Offset Program will function more efficiently and fairly after the department implements significant improvements to the student loan system."

The department did not set a new start date for involuntary collections. Officials confirmed that both wage garnishment and federal payment offsets (such as intercepted tax refunds) will remain on hold for now.

Background and Numbers

Federal borrowers enter default when they are at least 270 days past due. As of September, more than 5 million Americans were in default on federal student loans, according to department figures. In addition, nearly 10% of borrowers were more than 90 days delinquent in the third quarter of 2025, Federal Reserve Bank of New York data show.

Student loan payments were suspended from March 2020 through April 2023 as part of pandemic-era relief; the department then allowed a one-year grace period during which missed payments would not cause default. In May, the department had signaled it would resume collections activity, and last December it announced plans to restart wage garnishment in January, with initial notices slated for roughly 1,000 borrowers the week of Jan. 7.

Advocates for borrowers welcomed Friday's announcement. "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.

Policy Changes Underway

Congress ordered an overhaul of repayment options last year, citing complexity in the existing plans. Under the planned changes, new borrowers will be offered two clear choices: a standard repayment plan and an income-based option that adjusts payments according to earnings. Separately, the department recently abandoned the SAVE Plan — a program created under the previous administration to lower monthly payments and accelerate forgiveness — after it had been blocked in court.

For now, borrowers in default should monitor communications from the Education Department and review the new repayment options when they become available on July 1. The department said the pause is intended to ensure involuntary collections resume only after the new system is in place and borrowers have had time to choose affordable repayment paths.