The Trump administration has stepped back from a contentious policy that would have seen the wages of millions of Americans withheld over unpaid student loans.
Policy Reversal on Wage Garnishment
In a significant shift, the US Education Department announced on Friday 16 January 2026 that it is delaying plans to restart involuntary collections on federal student loans. This move halts the process of Administrative Wage Garnishment and the Treasury Offset Program, which were set to resume this month following a lengthy pandemic-era pause.
Nicholas Kent, the department’s chief of higher education, stated the agency is focused on helping borrowers resume regular payments with clearer and more affordable options. "The Department determined that involuntary collection efforts... will function more efficiently and fairly after the Trump Administration implements significant improvements to our broken student loan system," Kent said in an official statement.
Millions of Borrowers Affected
The decision directly impacts a vast number of Americans. According to the latest department data, more than 5 million people were in default on their federal student loans as of September. Millions more are behind on payments and risk falling into default this year.
Under the previously active rules, borrowers who default—defined as being at least 270 days behind on payments—could face both wage garnishment and the withholding of federal tax refunds. The Trump administration had already restarted the seizure of tax refunds last spring and, in December, announced wage garnishment would resume in January 2026, with initial notices sent to 1,000 borrowers.
Advocates Welcome Delay Amid Overhaul
Friday's announcement was met with relief from borrower advocacy groups. Aissa Canchola Bañez, policy director at the nonprofit Protect Borrowers, argued the original plans were "economically reckless" and risked pushing nearly 9 million defaulted borrowers deeper into debt.
The department has not set a new date for restarting involuntary collections. The delay is intended to give borrowers time to evaluate new repayment plans mandated by Congress, which are scheduled to launch on 1 July. These new plans will simplify options to a standard plan and an income-driven alternative.
This policy shift follows the department's recent scrapping of the SAVE Plan, an initiative created under former President Joe Biden that offered lower payments and faster loan forgiveness. That plan was blocked by a federal judge after legal challenges from Missouri and other states.
