Student loan borrowers will not have their wages garnished if they default, the Trump administration says in reversing policy

In a reversal of a recently announced policy, the Education Department said Friday it will postpone seeking wage garnishment, forfeit tax refunds and collect other interest from federal student loan borrowers in the event of default.

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The delay in collections will allow distressed borrowers more time to rehabilitate their loans and “enable the department to implement key student loan repayment reforms” passed under the One Big Beautiful Bill last summer, the department said in a statement.

President Donald Trump’s administration said in December that it planned to withhold wages starting the week of January 7. It is not clear whether the ministry has collected any wages since then.

Earlier this week, Education Secretary Linda McMahon told NBC 10 WJAR in Rhode Island that “there is a pause” on wage garnishment.

“During the previous administration, I think the whole loan repayment issue became very confusing. People stopped paying. They didn’t know if their loan would be forgiven or how much it would be forgiven,” McMahon said.

“We’re just starting to raise money again to say, ‘You know you’re in default, and you don’t want this on your credit score,'” she added.

McMahon said the department has now raised about $500 million from borrowers. The next “stage” will be wage garnishment, she said.

McMahon did not say how long the hiatus would last.

The federal government stopped wage garnishments on defaulted federal loans in early 2020 as part of financial relief measures during the coronavirus pandemic. Former President Joe Biden extended the pause on federal student loan payments in October 2023. In May of last year, the Trump administration resumed making the required payments.

The One Big Beautiful Bill Act, passed by Congress in July, makes several changes to borrowing and repayment of federal student loans, including reducing the number of repayment plans, lowering caps on borrowing limits for some graduate students and implementing a new income-driven repayment plan.

Borrowers are considered delinquent when they miss a single payment, and default after 270 days, or about nine months, of nonpayment. At that point, the federal government can garnish up to 15% of the borrower’s paycheck after deductions, and can withhold funds from federal and state tax refunds, Social Security payments and other federal benefits.

Student loan expert Robert Farrington told PBS News that making a single payment would pull the borrower out of default and reset the nine-month clock.

Student loan advocates praised the government’s pause on wage increases.

“In the midst of a growing affordability crisis, the [Trump administration’s] The plans were economically reckless and would have risked pushing nearly 9 million distressed borrowers deeper into debt, Issa Canchola Banez, policy director at Protect Borrowers, said in a statement.

But others said the government’s move was fiscally irresponsible.

“Not only will this increase costs to taxpayers, but it will also exacerbate affordability challenges by allowing student loan burdens to balloon and putting upward pressure on interest rates and inflation,” Maya McGuinius, chair of the Committee for a Responsible Federal Budget, said in a statement.