Education Department Pauses Wage Garnishment and Tax Refund Seizures for Defaulted Student Loans
The U.S. Department of Education has paused plans to garnish wages and seize tax refunds from borrowers who have defaulted on their federal student loans, delaying enforcement measures that had been set to resume nationwide. The announcement, made on Friday, temporarily halts forced collection efforts affecting millions of borrowers whose loans are in default.
Federal student loans are governed by a separate set of federal laws that give the government wide powers to collect unpaid debt. Under these laws, the government acts as the lender, servicer, and collector of student loans. Once a loan enters default, the government may pursue collection without filing a lawsuit or obtaining a court judgment. Those collection powers remain in place unless the Department of Education chooses to pause or delay their use.
According to a release from the U.S. Department of Education, the pause applies to wage garnishment, tax refund seizures handled through the Treasury Department, and other forced collection tools. The department said the delay is intended to give officials time to update repayment systems as broader changes to federal student loan programs move forward.
Under Secretary of Education Nicholas Kent said the agency determined that forced collection programs would function more effectively after additional reforms are in place. He described the current student loan system as broken and said the pause would support a shift toward revised repayment options.
The decision provides temporary relief to borrowers whose loans have entered default. Federal student loans are generally considered in default after at least 270 days of missed payments. Once that point is reached, federal law allows required collection actions to begin, including ordering employers to withhold part of a borrower’s wages.
Administrative wage garnishment is a process allowed under federal law that lets the government require employers to withhold part of a borrower’s paycheck to repay a defaulted student loan. In most consumer debt cases, creditors must first obtain a court judgment before wages can be garnished. Federal student loans are different. Once default occurs, the Department of Education may begin garnishment without court approval, leaving borrowers with few ways to challenge the action before it starts.
Wage garnishment for defaulted borrowers had been scheduled to begin last week. Education Secretary Linda McMahon previously said the department collected roughly $500 million from defaulted borrowers after forced collections resumed following a five-year pandemic pause. She also said the department had paused enforcement again as part of an internal review.
The pause also applies to tax refund seizures carried out through the Treasury Offset Program. This long-standing federal program allows agencies to collect unpaid debts by intercepting tax refunds and certain federal payments. When a student loan is in default, tax refunds may be automatically redirected toward the outstanding balance unless the agency pauses the offset or the borrower brings the loan out of default.
Roughly five million borrowers are currently in default, according to figures cited by the department. For those borrowers, the pause delays both wage withholding and tax refund interception, two of the government’s most direct collection methods.
The department said the pause is also meant to give borrowers more time to pursue loan rehabilitation. Rehabilitation is a process allowed under federal law that lets borrowers remove a loan from default by making a series of qualifying payments. Completing rehabilitation brings the loan back into good standing and stops forced collection efforts.
The announcement comes as the administration prepares to launch a new income-driven repayment option authorized under the Working Families Tax Cuts Act. That plan is scheduled to become available on July 1, 2026, after several repayment programs created under the prior administration were ended. Income-driven plans generally base monthly payments on a borrower’s income, a structure meant to reduce the risk of future defaults.
The Department of Education has not announced a new date for restarting wage garnishment or tax refund seizures.
