Education Department Pauses Wage Seizures for Millions of Defaulted Borrowers

2026-01-17 politics

Washington, Saturday, 17 January 2026.
Reversing immediate plans to garnish wages, the administration halted forced collections for 5 million borrowers Friday, delaying revenue recoupment to restructure repayment options mandated by 2025 legislation.

Policy Reversal and Scope of Impact

The Department of Education formally announced on Friday, January 16, 2026, that it would indefinitely pause involuntary collections—including wage garnishment and tax refund seizures—for borrowers in default on federal student loans [2][3][8]. This decision halts the administration’s previous initiative to restart these recovery measures, which were originally slated to begin during the week of January 7, 2026 [3]. The suspension marks a significant pivot in the administration’s approach to debt recovery, as Education Secretary Linda McMahon had confirmed as recently as January 13 that a pause was in effect following initial plans to send garnishment notices [3][6].

Legislative Reforms and Implementation Hurdles

Administration officials cite the logistical necessity of finalizing new repayment structures mandated by the “One Big Beautiful Bill Act” (OBBBA), signed into law by President Trump on July 4, 2025, as the primary driver for the delay [6]. The legislation directs the Department of Education to streamline federal student loan repayment plans and provide a “second chance” for defaulted borrowers to rehabilitate their loans [6]. These new repayment options are currently scheduled to become available on July 1, 2026 [2].

Fiscal Implications and Political Reactions

The financial implications of suspending collections are substantial. The Committee for a Responsible Federal Budget estimates that maintaining this pause could cost the federal government up to $5 billion annually [8]. Maya MacGuineas, the organization’s president, criticized the move as “economically reckless,” arguing that allowing student loan burdens to balloon places upward pressure on inflation and interest rates [3][8]. This stands in contrast to the revenue recoupment goals originally signaled by the administration’s resumption of the Treasury Offset Program in May 2025 [8].

Sources

Student Loans Consumer Debt