The Trump administration has decided to pause plans to withhold pay from student loan borrowers who default on their loans. This means millions of Americans can breathe a bit easier, at least for now.
On Friday, the Education Department announced that involuntary collections on federal student loans will stay on hold while new repayment plans are being developed. This is a major shift, as earlier plans aimed to resume wage garnishments this month, following a pandemic-era pause.
Nicholas Kent, the head of higher education at the department, emphasized their goal: “We want to help borrowers get back to regular, on-time payments with clearer and more affordable options.”
When borrowers default—meaning they’re at least 270 days behind on payments—they risk having their wages garnished and federal tax refunds withheld. These penalties were on hold during the payment pause that began in March 2020.
Last spring, Trump officials hinted they would restart collecting tax refunds from defaulted borrowers. In December, they even announced plans to begin wage garnishment in January. However, both of these actions have now been temporarily halted.
The Education Department didn’t set a new timeline for these involuntary collections but said the delay would give borrowers time to explore new repayment options that are expected to launch on July 1.
According to data from the Education Department, over 5 million Americans were in default on their federal student loans as of September. Additionally, millions are at risk of falling behind this year. In the third quarter of 2025, nearly 10% of borrowers were over 90 days delinquent, as reported by the Federal Reserve Bank of New York.
Payments were paused from March 2020 to April 2023, with a one-year grace period afterward allowing missed payments to avoid default. In May, the Education Department announced plans to resume collections.
Secretary of Education Linda McMahon recently pointed out that the pandemic pause led to a significant drop in loan repayments. Student loan advocates have praised the recent announcement, arguing that resuming wage garnishment would have been economically harmful. Aissa Canchola Bañez, a policy director at Protect Borrowers, noted it could have pushed nearly 9 million defaulted borrowers deeper into debt.
Last year, Congress directed the department to simplify repayment plans that had become too complex. New borrowers will have two choices: a standard plan or one that adjusts payments based on income.
However, there have been setbacks. Last month, the department scrapped the SAVE Plan, initiated under former President Joe Biden, which aimed to lower payments and fast-track loan forgiveness.
It’s clear that student loan repayment is a pressing issue and continues to evolve. With many borrowers still struggling, it’s crucial to stay informed about changes that could impact their financial futures.
For further insights and up-to-date information, check out the Federal Reserve Bank and the U.S. Department of Education.
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