Education Dept Delays Restart of Wage Garnishment and Treasury Offsets for Defaulted Federal Student-Loan Borrowers
The Education Department on Jan. 16 announced it will postpone restarting Administrative Wage Garnishment and Treasury Offset collections for federal student‑loan borrowers in default, reversing a December plan that would have sent notices to about 1,000 borrowers the week of Jan. 7. Officials, including Secretary Linda McMahon, said the pause gives borrowers time to rehabilitate loans and evaluate repayment reforms from last summer’s One Big Beautiful Bill Act and new income‑based options due July 1; advocates warned resuming garnishment would have pushed millions of defaulted borrowers deeper into debt (estimates cite more than 5 million already in default and as many as 9 million at risk), while critics say the delay is costly to taxpayers, and the department says it has already collected roughly $500 million since restarting collections though it’s unclear whether any wages were actually garnished.
📌 Key Facts
- On Jan. 16 the Education Department announced it was postponing a planned restart of wage garnishment, Treasury offsets (seizing tax refunds) and other federal benefit collections for defaulted student‑loan borrowers, reversing a December plan that had aimed to resume with notices to about 1,000 borrowers the week of Jan. 7.
- The pause specifically keeps Administrative Wage Garnishment and the Treasury Offset Program on hold.
- Education Secretary Linda McMahon said "there is a pause," described collections as the next planned "phase," and, along with higher education chief Nicholas Kent, framed the move as part of fixing a "broken student loan system" to make collections more efficient and fair.
- The department says it has collected about $500 million from borrowers since restarting payments, but reporting notes uncertainty over whether any wages were actually garnished during the brief January restart window.
- Officials say the delay is intended to give defaulted borrowers time to rehabilitate loans and to evaluate and implement repayment reforms from last summer’s One Big Beautiful Bill Act — measures that consolidate repayment plans, cap some graduate borrowing and add a new income‑driven plan — with new repayment options scheduled to be available beginning July 1 (including an income‑based option replacing the blocked SAVE plan).
- As of September, more than 5 million borrowers were already in default and nearly 10% of borrowers were over 90 days delinquent in Q3 2025; advocates warn that resuming garnishments now could have pushed nearly 9 million defaulted borrowers further into debt and called such a move "economically reckless."
- Fiscal‑hawk critics (including CRFB’s Maya MacGuineas) contend the pause is costly to taxpayers and could worsen long‑term affordability by allowing debts to balloon.
📊 Relevant Data
Among federal student loan borrowers who first received undergraduate loans between 1998 and 2018, 51% of Black borrowers had a negative net worth (debts exceeding assets), compared to 38% of Hispanic or Latino borrowers and 37% of White borrowers.
The Student Loan Default Divide: Racial Inequities Play a Role — The Pew Charitable Trusts
43% of Hispanic or Latino student loan borrowers lived in states with higher-than-average cost of living, compared to 21% of Black borrowers and 28% of White borrowers; among those who defaulted, 53% of Hispanic or Latino borrowers were in such states.
The Student Loan Default Divide: Racial Inequities Play a Role — The Pew Charitable Trusts
19% of Hispanic or Latino student loan borrowers attended for-profit schools, compared to 15% of Black borrowers and 9% of White borrowers, which are associated with higher noncompletion rates and default risks.
The Student Loan Default Divide: Racial Inequities Play a Role — The Pew Charitable Trusts
14.7% of student borrowers who attended private for-profit colleges defaulted within three years of beginning repayment, compared to 6.39% for those at private non-profit colleges.
National Student Loan Default Rate [2025]: Delinquency Data — Education Data Initiative
At age 30, over 20% of associate degree holders have defaulted on student loans, compared to roughly 10% of bachelor's degree holders.
National Student Loan Default Rate [2025]: Delinquency Data — Education Data Initiative
📰 Source Timeline (3)
Follow how coverage of this story developed over time
- Education Department confirms that both Administrative Wage Garnishment and the Treasury Offset Program will remain on hold, reversing a planned January restart that was to begin with notices to about 1,000 borrowers the week of Jan. 7.
- Officials say the delay is to give borrowers time to evaluate new repayment plans scheduled to be available starting July 1, including a new income-based option replacing Biden’s blocked SAVE plan.
- As of September, more than 5 million borrowers were already in default, nearly 10% of borrowers were over 90 days delinquent in Q3 2025, and advocates estimate nearly 9 million defaulted borrowers could have been pushed further into debt if garnishment resumed now.
- Education Secretary Linda McMahon and higher education chief Nicholas Kent publicly frame the move as part of fixing a 'broken student loan system' and making collections 'more efficient and fair.'
- Education Department issued a Jan. 16 statement formally postponing garnishing wages, seizing tax refunds and collecting other federal benefits from defaulted borrowers, reversing its December plan to resume garnishments starting the week of Jan. 7.
- Education Secretary Linda McMahon said in a local TV interview that 'there is a pause' on wage garnishing, described the resumption of collections as the next planned 'phase,' and said the department has already collected about $500 million from borrowers since restarting payments.
- The department frames the delay as giving defaulted borrowers more time to rehabilitate loans and to 'implement major student loan repayment reforms' enacted in last summer’s One Big Beautiful Bill Act, which consolidates repayment plans, caps some graduate borrowing and adds a new income‑driven plan.
- Student‑loan advocates like Protect Borrowers’ Aissa Canchola Bañez say pressing ahead with garnishments would have been 'economically reckless' and risked pushing nearly 9 million defaulted borrowers deeper into debt, while fiscal‑hawk group CRFB’s Maya MacGuineas criticizes the pause as costly to taxpayers and likely to worsen long‑term affordability by letting debts balloon.
- The piece notes uncertainty over whether any wages have actually been garnished yet since the January restart window the department had previously previewed.