The Department of Education has decided to pause its initial motion of wage garnishment for student loan borrowers whose account status was in default. In an official announcement last Friday, it was noted that the temporary pause will allow borrowers more options to rectify their loan balances, and the Department of Education to coordinate more student loan repayment revisions under the Working Families Tax Cuts Act as part of the Trump Administration’s One Big Beautiful Bill.
Examples of reform under the aforementioned act include providing additional opportunities for borrowers to rectify their loans and making repayment simpler. The act also allows the rectification of defaulted loans a second time, whereas before borrowers were given only one opportunity to rehabilitate them. Default borrowers are those who have not paid on their student loans for 270 days or more. At this stage, the loan’s service provider is transferred from their oversight to the oversight of the Department of Education’s Default Resolution Group or another collection agency.
According to NPR, wage garnishment notifications to default borrowers were rolled out the week of January 7th and will increase monthly until the account’s status changes. Penalties for defaulting borrowers outside of check garnishment include seizing tax refunds, disability benefits, and Social Security benefits. The government can also withhold up to 15% of one’s disposable income if you’re already in default, as noted by the Administrative Wage Garnishment (AWG). Federal Student Aid (FSA) has confirmed that borrowers will be notified 30 days prior to their wage garnishment starting. Borrowers are also given the opportunity to a formal court hearing, and/or enter into a new written agreement with the Department of Education. When working specifically with the Department of Education’s Default Resolution Group, borrowers are not charged to receive this help.
A Fall 2025 study released by the Education Data Initiative found that national student loan debt exceeded $1.8M, up 4.16% year over year. Of that amount, 11.3% of student loan balances were delinquent. This data shows that student loan debt is not only increasing over time, but that many borrowers are finding themselves in tough spots with their loans as their pay arrangement continues. Borrowers who are considered low income, minorities, or first-generation college students are most at risk for default. This is due to the wealth gap between white Americans and other racial groups, to pay back the amount owed more effectively, information gaps as it pertains to being educated on the loan’s terms, and less family guidance in some cases.
At this time, no official date has been set for the duration of this pause. However, student loan borrowers are encouraged to check their student loan provider’s website for further details and updates.