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The U.S. Department of Education (the Department) today announced that it will delay the implementation of involuntary collections on federal student loans, including Administrative Wage Garnishment (AWG) and the Treasury Offset Program (TOP). The temporary delay will enable the Department to implement major student loan repayment reforms under the Working Families Tax Cuts Act (the Act) to give borrowers more options to repay their loans. These reforms, which include simplifying repayment options and providing an additional opportunity for borrowers to rehabilitate their federal student loans, reflect the Trump Administration’s commitment to provide better support for current and future borrowers in repayment.
The Act reduces the number of federal student loan repayment plans, eliminating a confusing maze of options and making it easier for borrowers to select either a single standard repayment plan or income-driven repayment (IDR) plan that best meets their needs. This includes a new IDR plan that waives unpaid interest for borrowers with on-time payments whose payments do not fully cover accrued interest, and that includes small matching payments from the Department in certain circumstances to ensure that outstanding principal is reduced each month. The plan will be available for borrowers beginning July 1, 2026. The delay in collections will give defaulted borrowers additional time to evaluate these new repayment options once they consolidate their loans or complete a repayment or rehabilitation agreement.
The Act also gives borrowers a second chance to rehabilitate a defaulted loan, allowing them to get their repayments back on track and get the loan out of default. Prior to passage of the Act, the law only permitted borrowers a single rehabilitation opportunity. The delay in collections will give defaulted borrowers additional time to begin the rehabilitation process, including the ability to rehabilitate their loan a second time.
“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, which will support a stronger financial future for borrowers and enhance the long-term health of the federal student loan portfolio,” said Under Secretary of Education Nicholas Kent. “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.”
During the delay, the Department encourages borrowers in default to explore their options for resolving their defaulted student loans with the defaulted federal loan servicer. The Department reports student loan defaults to credit reporting agencies, which may adversely impact borrower credit reports.
Information source: US Department of Education
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