Student Loans, Wage Garnishment, and What Borrowers Need to know in 2026

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After several years of pandemic-era relief, federal student loan collections were scheduled
to resume in early 2026, including wage garnishment for borrowers who had fallen into
default. The U.S. Department of Education started sending notices at the end of 2025
warning that paychecks, tax refunds, and certain federal benefits could soon be seized to
repay unpaid student loans.


However, those enforcement actions are now temporarily paused again.

In mid-January 2026, the Department of Education announced another pause on wage
garnishment and other involuntary collections. This pause came just as collections were
set to fully restart and is intended to give borrowers more time while the federal
government implements major changes to the student loan repayment system later this
year. Importantly, this pause does not forgive student loan debt and does not eliminate
the government’s authority to collect. It is a delay, and collections are still expected to
resume once the new repayment framework is in place.
This creates a confusing but critical moment for borrowers. Understanding what default is,
why collections were returning, and what actions borrowers can take now is essential to
avoiding serious financial consequences later.

What Does It Mean to Default on a Student Loan?

Payments on federal student loans start 6 months after you graduate or stop taking
classes. A federal student loan is considered delinquent as soon as a borrower misses a
payment. If missed payments continue, the loan can eventually enter default.
For most federal student loans, default occurs after 270 days (about nine months) without
the required payment. At that point, the consequences escalate quickly:

  • The entire remaining loan balance becomes immediately due
  • The borrower loses access to most repayment plans and deferment options
  • The default is reported to credit bureaus, often causing significant credit score
    damage
  • The federal government gains broad authority to collect the debt involuntarily

As of 2025 and early 2026, millions of borrowers were already in default, with millions
closer behind, many of whom had not made payments since the pandemic-era pause
ended.

How Does the Government Collect on Defaulted Student Loans?

Once a loan is in default, the federal government has tools that are far more powerful than
those available to private lenders.
The most significant collection methods include:

  • Wage garnishment – The government to withhold up to 15 percent of a borrower’s
    disposable pay directly from their paycheck through their employer
  • Tax refund interception – The government can seize some or all of a federal tax
    refund
  • Federal benefit offsets – including certain Social Security benefits

These actions do not require a court order. Borrowers must receive notice and are generally
given 30 days to respond or act, but if no steps are taken, collections can begin
automatically once the current pause is lifted.

Why Collections Were Set to Resume in 2026


Student loan collections were paused for years during the pandemic, and the Biden
administration later extended a “no consequences” period even after payments technically
resumed. By 2025, the Trump administration made clear that it intended to restart
enforcement, arguing that it lacked legal authority to broadly forgive student debt and that
long-term nonpayment threatened the stability of the federal loan system.
Notices warning of tax refund seizures and wage garnishment began rolling out in stages,
with wage garnishment expected to follow shortly after. Economists warned that restarting
collections could strain household budgets, especially for borrowers who had reorganized
their finances around years without required payments

Why Collections Are Paused Again


Despite plans to resume collections, the Department of Education announced another
pause in January 2026. According to the Department, the delay is intended to give
borrowers time to evaluate new repayment options while major reforms are implemented
under recently passed legislation, with changes formally taking effect on July 1, 2026.
The Department is also facing a large administrative backlog. Hundreds of thousands of
repayment plan applications remain unprocessed, and some new income-based
repayment programs are not yet fully operational. Borrower advocates argue that restarting
garnishment before these systems are ready would unfairly penalize borrowers who are
trying to comply.
Critics argue that repeated pauses discourage repayment and allow balances to grow
larger over time. Editorial commentary has framed the move as a policy reversal that
extends pandemic-era relief well beyond its original purpose.

How to Avoid Default If You Are Struggling to Pay


For borrowers who are not yet in default, the most important step is to act early. Default is
not sudden. It occurs after months of missed payments.
Steps to avoid default include:

  • Enroll in an income-driven repayment plan if your required payment is unaffordable**
  • Update your income information promptly if your earnings drop
  • Contact your loan servicer immediately if you miss a payment or anticipate trouble
    paying
  • Open and respond to all notices from your servicer or the Department of Education
    Many borrowers enter default simply because they do not respond to notices or assume
    they have no options. In most cases, options still exist until default occurs

What to Do If You Are Already in Default
If you are already in default, the current pause provides a valuable opportunity to act before
collections resume.
Borrowers in default generally have three main paths forward:

  1. Loan Rehabilitation
    Rehabilitation involves agreeing to make a series of affordable monthly payments, often
    based on income. If completed successfully, the loan is removed from default and the
    default can be taken off the borrower’s credit report.
  2. Loan Consolidation
    Consolidation replaces defaulted loans with a new federal loan, restoring eligibility for
    repayment plans. This is often the fastest way out of default, though it may reset progress
    toward forgiveness programs.
  3. Full Repayment
    Paying the balance in full immediately resolves default, though this is unrealistic for most
    borrowers.
    Borrowers can also request a hearing if they believe garnishment would cause financial
    hardship or if there are errors in their account. Importantly, if no action is taken within the
    required time frame after notice, involuntary collections can begin once the pause ends.

Why This Matters for Students and Recent Graduates


Even borrowers who are not currently in default should pay attention. The return of
collections signals a broader shift toward stricter enforcement after years of leniency.
Missed payments now have more immediate consequences, including credit damage and
eventual wage garnishment.
For students and recent graduates, understanding repayment obligations early and
choosing a manageable plan can prevent long-term financial harm.


Steps and Helpful Tips for Students Currently in College


For students who are still enrolled, student loan delinquency often begins after graduation,
but the habits that prevent it start now. Taking a few intentional steps while in school can
dramatically reduce the risk of missed payments, default, and long-term financial stress
later.

  • Know which loans you have and who services them – Log in to your Federal
    Student Aid account at least once per year to review your federal loans, balances,
    and loan servicers. Many students graduate without knowing who to contact once
    repayment begins.
  • Understand your in-school status and grace periods – Most federal student loans
    do not require payments while you are enrolled at least half-time and include a
    grace period after graduation. Know when your grace period ends so repayment
    does not catch you by surprise.
  • Keep your contact information updated – Update your email address, mailing
    address, and phone number with both your loan servicer and your school. Missed
    communications are a common cause of unintentional delinquency.
  • Borrow intentionally – Accept only the loan amount you actually need each
    semester. Borrowing less now reduces monthly payments later and lowers the risk
    of repayment difficulty.
  • Track interest while in school – Some loans accrue interest while you are enrolled.
    Even small, voluntary interest payments during school can reduce future balances
    and make repayment more manageable.

The Bottom Line

Federal student loan collections were scheduled to resume in early 2026, including wage
garnishment for borrowers in default. While those actions are currently paused again, the
pause is temporary. The government’s authority to collect has not gone away.
Borrowers who use this window to understand their loan status, avoid default, or resolve
existing defaults will be far better positioned than those who wait for enforcement to
resume. In this moment, proactive engagement is the most powerful form of financial
protection.

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