Wage Garnishment for Defaulted Student Borrowers on Pause

The Department of Education will not be garnishing wages or seizing tax refunds from federal student loan borrowers who are in default on their student loan payments.

A Department of Education press release called the delay in wage garnishments temporary, and said the delay would allow the department to implement student loan repayment reforms under the Working Families Tax Cut Act. 

The Under Secretary of Education Nicholas Kent had this to say in a press release:

“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.”

This means lenders won’t have garnishment as a way to obtain payments from defaulted borrowers. They will have to wait until the pause is lifted to use garnishment again as a tool for pursuing payments on defaulted student loan debts.

Contrasting Viewpoints on Pausing Wage Garnishment

“After months of pressure and countless horror stories from borrowers, the Trump Administration says it has abandoned plans to snatch working people’s hard-earned money directly from paychecks and tax refunds simply for falling behind on their student loans,” said Aissa Canchola Bañez, policy director at Protect Borrowers.

“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 in debt.” 

But Maya MacGuineas, president of the Committee for a Responsible Federal Budget, had a different point of view. 

“We’re not in a pandemic or financial crisis or deep recession,” MacGuineas said in a press release. “There’s no justification for emergency action on student debt, no good reason for the President to back down on efforts to actually begin collecting debt payments again.”

CFPB Reports Record Student Loan Complaints

A record number of student loan borrowers filed complaints about their student loans, according to a report from the Consumer Financial Protection Bureau. 

From July 2024 through June 2025, the CFPB received 22,900 complaints on student loans. Of the complaints about 4,500 were on private loans and about 18,400 were on federal loans. 

The 4,500 in private loan complaints was an increase of about 33% from the previous year. The 18,400 in federal loans is up about 36% from the prior year. Taken together, the 22,900 in complaints were the highest in a single year, according to the CFPB.

The CFPB also received about 2,100 in debt collection complaints regarding both federal and private student loans. 

The End May Be Close for the SAVE Plan

An income-driven repayment plan called the SAVE plan may be coming to an end. The plan initiated under President Biden offered borrowers both lower monthly payments and lower interest as well as a fast track to loan forgiveness. 

The SAVE plan, blocked since 2024 by a federal appeals court, has forced millions of borrowers  into administrative forbearance, Forbes reports. 

But now, a proposed settlement would end the SAVE plan and force SAVE plan borrowers to choose a new repayment plan. As 7 million SAVE plan borrowers select new repayment plans this could result in a huge backlog and delays in processing that could last 25 months, Forbes reports.

Sections of CFPB Report Cut by Trump Administration

The consumer watchdog agency has released an annual report of the private education student loan ombudsman, but dramatic cuts of the report were removed by the Trump administration, Politico reports. 

Sections of the study that explained steps to get out of default and loan cancellation options were cut and not published in the report. The report, which started as 36 pages, is now 15 pages shorter. 

“This really does seem like political interference with a report that’s required under federal law,” said Mike Pierce, who served as the senior advisor to the student loan ombudsman at CFPB from 2011 to 2018, to Politico. 

The Bottom Line

Wage garnishment for defaulted student loan borrowers is on a temporary pause. Complaints from student loan borrowers on their student loans is at a record high. A proposed settlement of the SAVE plan would stop the plan and cause 7 million borrowers to select new repayment plans.

Several cuts were made to a CFPB annual report on private education student loan ombudsman including sections that would explain the steps to getting out of default and loan cancellation options.