WASHINGTON — According to the U.S. Department of Education, the government on Jan. 16, 2026, reversed course on its plan to begin garnishing wages from federal student loan borrowers in default, shelving the effort while new repayment rules take effect. The freeze has no end date. More than 5 million borrowers remain in default on federal student loans, and the government has not said when — or whether — involuntary collections will resume.

U.S. Pauses Student Loan Wage Garnishment

The department had announced in late December 2025 that garnishment notices would go out to roughly 1,000 borrowers starting the week of Jan. 7, the Associated Press reported at the time. Officials said the number would increase each month after that.

Education Secretary Linda McMahon told NBC 10 WJAR in Rhode Island that “there is a pause” on wage garnishing, and confirmed the department had already collected about $500 million from defaulted borrowers through other means — primarily by withholding tax refunds and federal benefit payments.

The stated reason for the reversal: the Working Families Tax Cuts Act, which President Donald Trump signed into law in July 2025. That legislation overhauled the federal student loan system, and the department said it needed time to put the new rules in place before restarting involuntary collections.

How default works under federal rules

A federal student loan enters default after 270 days — roughly nine months — of missed payments, according to the Department of Education. Borrowers who miss a single payment are considered delinquent but are not yet subject to collections.

About 5.5 million borrowers were in default as of late 2025, NPR reported, citing an analysis of federal loan data published by the American Enterprise Institute. An additional several million were severely delinquent but had not yet crossed the 270-day threshold.

“If you think you can’t afford your payments now, wait till you see how unaffordable it’s going to be if you default,” Betsy Mayotte, president of the Institute of Student Loan Advisors, told ABC affiliate WTVD.

The garnishment process, explained

Under a program called Administrative Wage Garnishment, the federal government can order an employer to withhold money from a borrower’s paycheck without going to court. Private lenders do not have that authority — they must obtain a court order first.

The process follows a set sequence. The Department of Education sends a written notice to the borrower at least 30 days before garnishment can begin. During that 30-day period, the borrower may request a hearing — typically a written review, not an in-person proceeding.

Borrowers can raise several objections: financial hardship, eligibility for a loan discharge, or recent re-employment after at least 12 months without work. If the borrower does not respond, the garnishment order goes to the employer, which is legally required to comply.

What to know at a glance

Default begins after 270 days of nonpayment on a federal student loan.
Borrowers must receive written notice at least 30 days before any garnishment.
The cap on garnishment is 15% of disposable income — pay remaining after taxes and mandatory deductions.
Borrowers must retain at least $217.50 per week, equal to 30 times the federal minimum wage.
Private student loans are not covered. Private lenders must sue in court.
The pause on garnishment is in effect but has no announced end date.

The 15% cap and what it means in practice

The government may withhold up to 15% of a borrower’s disposable earnings per pay period, though a floor applies: the borrower must be left with at least $217.50 a week.

Mayotte told WTVD that the garnishment amount frequently exceeds what a borrower’s monthly payment would have been under a standard repayment schedule. In other words, borrowers who could not keep up with the smaller amount may face a larger one later.

“It certainly gets people’s attention,” Mayotte said. “From a borrower who’s struggling perspective, it can hit where it hurts.”

New repayment options on the horizon

The department said a new income-driven repayment plan is set to become available on July 1, 2026. The plan is expected to include provisions aimed at preventing balances from growing for borrowers who make on-time payments, according to the department’s Jan. 16 announcement.

The law also permits borrowers to rehabilitate a defaulted loan a second time — a significant shift, because previously the option was available only once. Rehabilitation requires nine consecutive on-time monthly payments, calculated based on income.

One detail matters for timing: a borrower who submits a rehabilitation application within 30 days of receiving a garnishment notice and makes the first payment within that same period can block the garnishment from taking effect, according to guidance from the National Consumer Law Center’s Student Loan Borrower Assistance project.

Loan consolidation is the other path out. Rolling a defaulted loan into a new Direct Consolidation Loan resets the status, though it may affect progress toward Public Service Loan Forgiveness.

What to watch

The department has not announced a new date for restarting wage garnishment or the Treasury Offset Program. Borrowers who are unsure about their status can check their federal student aid account online or call the Default Resolution Group at 1-800-621-3115.

Advocacy groups have urged borrowers not to wait.

“Take action,” said Khandice Lofton, a counsel for Protect Borrowers. “If you are unable to afford your payments, reach out to your servicer and let them know your situation.”

SOURCES

DISCLAIMER: This article is for informational purposes only and is not financial, investment, tax, or legal advice. Consider your personal circumstances and consult a qualified professional before making financial decisions.

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