Garnishment paused for student loan borrowers
By: Medora Lee
USA Today
..,... Student loan borrowers in default are saved from wage garnishments - for now.
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The Department of Education said it's pausing plans to garnish wages and other income like tax refunds of student loan borrowers who are in default. The department had planned to begin wage garnishments the week of January 7. [2026]
..... The temporary halt will allow the department to "implement major student loan repayment reforms" such as simplifying repayment options and providing an additional opportunity for borrowers to rehabilitate their federal student loans, the department said in a release.
..... No time frame was given as to how long the pause will last, but it gives financially strained borrowers time to resolve defaulted loans with their federal loan servicer, the department said.
..... "The Department determined that involuntary collection efforts such as Administrative wage Garnishment and the Treasury Offset Program will function more efficiently and fairly after the Trump Administration implements significant improvements to our broken student loan system," said Under-secretary of Education Nicholas Kent.
Credit scores still at risk
..... Although borrowers will get to hold on to their income a bit longer, the department warned that defaults will still be reported to credit agencies.
.... "The Department reports student loan defaults to credit reporting agencies, which may adversely impact borrower reports," it said.
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Lower credit scores have lasting effects. Lender use them to decide whether to approve loans and credit cards and to determine interest rates and credit limits.
..... "People are most upset when the want to get a house," Michele Raneri, vice president and head of U.S. research and consulting at TransUnion, told USA Today last year. [2025] "they saved some money, did their research, finally found one within budget, but when they go to get a mortgage, they find out their score's too low. That's something that will take a while to bring back up, so it's a missed opportunity."
Millions in default
..... More than 4 million Americans were technically in default, at least 270 days overdue, on their student loans as of the end of 2025, Ramneri said. They just hadn't been reported to the credit bureaus yet for various reasons, including processing lags, she said.
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When they've finally reported, almost 10 million borrowers, or almost 25% of the federal student loan portfolio, could be in default, the Department of Education said. That would be a record, experts said.
..... The pause is a win for struggling borrowers, said Aissa Canchola Banez, policy director at Protect Borrowers, which has been fighting to get the Trump administration to pump the breaks on wage garnishment. It estimated a borrower defaults on a loan every nine seconds, "Making an unprecedented default crisis three times worse than prior to the pandemic."
..... "Amidst the growing affordability crisis, the administration's plans would have been economically reckless and would have risked pushing nearly 9 million defaulted borrowers even further into debt," Canchola Banez said.
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However, some analysts said the halt is a loss for the country and the federal budget.
..... "Not only will it increase costs to the taxpayer, but it will also actually worsen affordability challenges by allowing student loan burdens to balloon and putting upward pressure on interest rates and inflation," said Maya MacGuineas, president of the nonprofit Committee for a Responsible Federal Budget.