The Department of Education announced on Friday it will temporarily suspend plans to garnish wages and seize tax refunds from borrowers who are in default on their federal student loans, backing away from collection actions that were expected to resume later this month. The pause affects millions of borrowers nationwide and is intended to give the Department time to implement new repayment and rehabilitation options before restarting involuntary collection activity.
According to the Department, the delay applies to administrative wage garnishment and the Treasury Offset Program, which allows the federal government to intercept tax refunds. Collection on most defaulted student loans has largely been paused since the start of the pandemic in 2020, and the Department had previously signaled that more aggressive measures would resume.
In its announcement, the Department said the temporary suspension will allow borrowers additional time to evaluate new repayment options that were passed by Congress as part of recent legislation aimed at simplifying the federal student loan system.
Key points from the announcement include:
- Involuntary collections, including wage garnishment and tax refund offsets, will be delayed for defaulted federal student loans.
- The pause is designed to give borrowers time to consolidate loans, enter repayment agreements, or pursue loan rehabilitation.
- New repayment options are expected to become available beginning July 1, 2026, including an income driven plan that waives unpaid interest for certain borrowers and may include small matching payments to help reduce principal balances.
- Borrowers will also have an additional opportunity to rehabilitate defaulted loans, a change from prior rules that limited rehabilitation to a single use.
Consumer advocates welcomed the decision, arguing that existing collection thresholds and income protections have not kept pace with the rising cost of living and can push struggling borrowers further into financial hardship.
While the pause is described as temporary, the Department emphasized that borrowers in default should use this period to explore repayment and rehabilitation options, noting that defaulted loans may still be reported to credit reporting agencies during the delay.
