Trump Admin Suspends Student Loan Wage Garnishments After Fierce Backlash — But 9 Million Borrowers Remain in Default Limbo

The Trump administration has unexpectedly suspended its plan to garnish wages from millions of student loan borrowers in default, reversing course just days after the first collection notices were issued.

Education Secretary Linda McMahon confirmed the policy change on 16 January, telling reporters in Rhode Island that wage garnishment efforts have been 'put on pause for a bit.' The Department of Education formalised the decision in a press release on the same day, stating that involuntary collections through both wage garnishment and the Treasury Offset Program would be delayed indefinitely.

This reversal came after the department had already sent notices to approximately 1,000 defaulted borrowers during the week of 7 January, with plans to escalate collection efforts monthly throughout 2026.

One Default Every Nine Seconds

The suspension arrives amid what advocacy groups are describing as an unprecedented default crisis. According to analysis by Protect Borrowers, 3.6 million new borrowers fell into default during President Trump's first year back in office, equating to one new default every nine seconds. This rate is nearly three times higher than the year before the pandemic, when 1.22 million borrowers defaulted.

The total number of borrowers now meeting the legal definition of default has climbed to nearly 9 million nationwide, with defaulted debts amounting to more than $92 billion (£68.44 billion).

'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 their paychecks simply for falling behind on their student loans,' said Aissa Canchola Bañez, policy director at Protect Borrowers.

Why the Administration Backed Down

The official justification for the reversal centres on the implementation of new repayment options. Under Secretary of Education Nicholas Kent stated 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.'

A new income-driven repayment plan is scheduled to become available on 1 July 2026 under the Working Families Tax Cuts Act, passed last year as part of the 'One Big Beautiful Bill'. The legislation also eliminated several Biden-era repayment plans, including the popular SAVE programme, which had enrolled roughly 8 million borrowers.

McMahon blamed the previous administration for creating confusion. 'During the previous administration, I think the whole repayment of loan issues became just so confusing,' she told reporters. 'People just stopped paying.'

Before announcing the pause, the department had already collected approximately $500 million (£372 million) from defaulted borrowers, according to McMahon.

Critics Divided on the Decision

Not everyone welcomed the reversal. The Committee for a Responsible Federal Budget labelled the move 'ridiculous' and 'incoherent', accusing the administration of reviving pandemic-era pauses it had promised to end.

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

However, borrower advocates argue the original plan would have been disastrous. A coalition including the NAACP, American Federation of Teachers, and Debt Collective sent an urgent letter to McMahon on 7 January demanding the department 'immediately halt its plan to resume garnishment of millions of struggling borrowers' wages.'

The letter highlighted that borrowers are waiting in a backlog of nearly one million applications to enrol in income-driven repayment plans, while mass layoffs at the department have made it even harder to access assistance.

The Political Dimension

The default crisis carries significant political weight. Protect Borrowers' analysis reveals that nearly two-thirds of borrowers who defaulted during the Trump administration—more than 2.6 million people—live in states that voted for Trump in the 2024 election.

With over 42 million Americans holding student debt exceeding $1.6 trillion (£1.2 trillion), the issue resonates widely across the electorate. Industry observers note that affordability concerns are seen as crucial for midterm elections by both political parties.

What Borrowers Should Do Now

The suspension offers a limited window for defaulted borrowers to take action. Options include loan rehabilitation, consolidation, or enrolling in an income-driven repayment plan via StudentAid.gov.

However, experts warn that the pause is temporary and could end unexpectedly once new repayment systems are fully implemented. Monthly payments remain due, and borrowers are advised to review their loan status and explore options before collections resume.

The department has yet to specify a new date for when involuntary collections will restart.