Education Department delays student loan wage garnishment while promising system reforms

The Education Department announced on Jan. 16, 2026 that it's temporarily pausing involuntary collection efforts including Administrative Wage Garnishment and the Treasury Offset Program for defaulted federal student loans. Under Secretary NKNicholas Kent said the determination was made so involuntary collection efforts will function more efficiently and fairly after the Trump Administration implements significant improvements to our broken student loan system. The pause applies to millions of borrowers in default.

Administrative Wage Garnishment allows the government to order employers to withhold up to 15% of a borrower's disposable pay to repay defaulted federal student loans. The Treasury Offset Program intercepts federal payments like tax refunds and Social Security benefits to collect defaulted debt. Both programs operate without requiring a court judgment. The Education Department restarted these collection efforts in 2025 after pausing them during the COVID-19 pandemic.

The department didn't specify how long the delay will last, saying only that it will allow time to institute broad reforms to the student loan system. The lack of a specific timeline creates uncertainty for borrowers who don't know if collections could resume in weeks or months. This gives the Trump administration flexibility to use the pause as political leverage heading into the 2026 midterm elections.

A new income-driven repayment plan will become available to borrowers in Jul. 2026. The plan waives unpaid interest for borrowers with on-time payments whose monthly deposits don't fully cover accrued interest. This prevents interest capitalization that causes loan balances to grow even when borrowers make payments. The Education Department framed the garnishment delay as necessary preparation for this new program.

CNN previously reported that millions of borrowers could be affected by wage garnishment efforts when collections restarted in 2025. Approximately 7 million federal student loan borrowers are in default, owing roughly $130 billion. Wage garnishment can take up to 15% of disposable income, creating severe financial hardship for low-income borrowers who are already struggling to afford basic expenses like rent and food.

The timing of the announcement raises questions about political motivations. Trump faces voter anger about affordability and economic concerns heading into 2026 midterms where Democrats could win House and Senate majorities. A CNN poll released Jan. 16 found 61% of Americans disapprove of Trump's handling of the economy—the worst mark of his two terms. Pausing collections allows Trump to claim he's helping struggling Americans.

Consumer advocates praised the pause but expressed skepticism about the Trump administration's commitment to long-term student debt relief. The administration previously tried to eliminate income-driven repayment plans and Public Service Loan Forgiveness during Trump's first term. Advocates worry the pause is a temporary election-year gimmick that will be reversed after the midterms.

The Education Department has broad administrative authority to determine when and how to collect defaulted student loans. This authority comes from the Higher Education Act and regulations governing federal student aid. Courts have generally deferred to agency expertise on collection timing and methods, giving the administration significant flexibility to pause or restart collections based on policy priorities.