The Trump administration has delayed a planned restart of debt collection measures against student loan borrowers in default, temporarily pulling back from a move that would have allowed the federal government to withhold wages and tax refunds from millions of Americans struggling with repayments.
The US Department of Education said on Friday that involuntary collections on federal student loans will remain paused as it works to finalise new repayment plans. The decision reverses earlier signals that wage garnishment would resume this month, marking a significant shift as the administration recalibrates its approach to the country’s long-running student loan crisis in the US.
Higher education under secretary Nicholas Kent said the department is focused on helping borrowers return to “regular, on-time repayment” through clearer and more affordable options. He added that enforcement tools such as Administrative Wage Garnishment and the Treasury Offset Program would function more “efficiently and fairly” only after major changes are made to what he described as a broken student loan system.
Under existing rules, federal student loan borrowers who are at least 270 days behind on payments are considered in default, allowing the government to garnish wages and seize federal tax refunds. These penalties were suspended during the pandemic-era pause on student loan repayments, protections that were lifted earlier even as many borrowers continued to face financial stress.
Last spring, Trump administration officials said they would resume intercepting tax refunds from borrowers in default. In December, the department announced plans to restart wage garnishment in January, with initial notices sent to about 1,000 borrowers in the first phase. Friday’s announcement confirms that both measures — withholding wages and federal payments — will now remain on hold.
Department data shows that more than 5 million Americans were already in default on their federal student loans as of September. Millions more have fallen behind on payments and face the risk of default this year, as raised earlier by The Indian Express in its previous reports on rising household debt in the US.
The Education Department has not announced a new timeline for restarting involuntary collections, saying the delay will give borrowers time to assess new repayment plans expected to roll out from July 1. Congress had last year directed the department to overhaul repayment options after critics argued the system had become confusing and difficult to navigate for borrowers.
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Under the changes, new borrowers will have access to two primary options — a standard repayment plan and an income-linked plan designed to cap monthly payments based on earnings, a structure aimed at preventing defaults rather than penalising them after the fact.
The shift comes amid continued legal and political battles over student loan relief. Last month, the department scrapped the SAVE Plan, introduced under former President Joe Biden, which offered lower monthly payments and faster paths to loan forgiveness. The plan had been blocked by a federal judge after Missouri and other states challenged it, part of a broader pushback against executive-led student debt relief efforts.
Student loan advocacy groups welcomed the pause, warning that resuming wage garnishment could have pushed millions of already defaulted borrowers deeper into financial distress.
“The administration’s plans would have been economically reckless and risked pushing nearly nine million defaulted borrowers further into debt,” said Aissa Canchola Banez, policy director at Protect Borrowers.
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For now, borrowers in default remain shielded from forced collections, though officials have made clear that enforcement is only deferred, not abandoned, as the administration presses ahead with reshaping the federal student loan repayment system.
(With inputs from AP)
