Student Loan Collections Delayed

• On January 16, 2026, the U.S. Department of Education (the Department) announced a delay of involuntary collections on federal student loans, including Administrative Wage Garnishment (AWG) and the Treasury Offset Program (TOP) 

• The pause supports implementation of student loan repayment reforms under the Working Families Tax Cuts Act 

• A new income-driven repayment (IDR) plan is slated to be available beginning July 1, 2026 

• The Department did not specify when involuntary collections will restart 

• The delay is intended to give defaulted borrowers time to evaluate new repayment options, including a second opportunity to rehabilitate a defaulted loan 

• During the delay, the Department will continue to report student loan defaults to credit reporting agencies 

The Department will temporarily delay the implementation of involuntary collections on federal student loans. This covers: 

• Administrative Wage Garnishment (AWG) for federal student loan debt 

• Treasury Offset Program (TOP), which intercepts federal payments such as tax refunds 

The delay aligns with forthcoming repayment reforms under the Working Families Tax Cuts Act. Reforms include simplifying plan choices, launching a new IDR plan that waives unpaid interest for on-time payers whose payments do not cover accrued interest, and allowing certain small matching payments to reduce principal each month. The Department indicates the new IDR plan will be available starting July 1, 2026. 

The Department states the pause provides additional time for defaulted borrowers to: 

• Consolidate or enter new repayment or rehabilitation agreements 

• Consider the simplified plan menu and the new IDR option 

• Use a second rehabilitation opportunity now permitted under the Act 

Important: The Department continues reporting defaults to credit bureaus during the delay.

• Employees with defaulted federal student loans subject to AWG or federal payment offsets 

• Employers processing AWG orders for federal student loan debt 

• Payroll teams responsible for initiating, suspending, or adjusting garnishment deductions 

This delay does not apply to: 

• Court-ordered garnishments unrelated to federal student loans 

• State-ordered garnishments, child support, tax levies, or private creditor garnishments 

• Voluntary payroll deductions employees authorize for loan repayment. 

👉  U.S. Department of Education Press Release: https://www.ed.gov/about/news/press-release/us-department-of-education-delays-involuntary-collections-amid-ongoing-student-loan-repayment-improvements