Washington, D.C. — The U.S. Department of Education announced it will temporarily delay involuntary collections on federal student loans, including Administrative Wage Garnishment and the Treasury Offset Program, as it prepares to implement major repayment reforms under the Working Families Tax Cuts Act.
The pause is intended to give borrowers—particularly those in default—additional time to evaluate new repayment options and take advantage of expanded pathways to bring their loans back into good standing. During the delay, the Department will focus on rolling out a simplified federal repayment system designed to reduce confusion and expand access to affordable repayment.
Under the Act, the number of federal student loan repayment plans will be reduced, allowing borrowers to choose between a single standard repayment plan or an income-driven repayment (IDR) option. A new IDR plan, available beginning July 1, 2026, will waive unpaid interest for borrowers who make on-time payments that do not fully cover accrued interest. In some cases, the Department will also provide small matching payments to help ensure loan principals decline over time.
The legislation also creates a second opportunity for borrowers to rehabilitate defaulted loans. Previously, federal law allowed only one rehabilitation attempt. The delay in collections will allow eligible borrowers to begin or restart the rehabilitation process before involuntary enforcement resumes.
“After the Biden Administration misled borrowers into believing their student loans would not need to be repaid, the Trump Administration is committed to helping student and parent borrowers resume regular, on-time repayment, with more clear and affordable options,” said Under Secretary of Education Nicholas Kent. He added that involuntary collections will function more “efficiently and fairly” once the new system is in place.
During the delay period, the Department is urging borrowers in default to contact their defaulted loan servicer to explore consolidation, repayment, or rehabilitation options. While collections are paused, the Department noted that student loan defaults may still be reported to credit bureaus, potentially affecting borrowers’ credit reports.
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