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The delay affects Administrative Wage Garnishment and the Treasury Offset Program, which allows the government to withhold federal tax refunds from borrowers who are at least 270 days behind on payments. Both penalties had been on hold since the pandemic-era pause on student loan payments began in March 2020.
The department said the delay will enable implementation of major repayment reforms mandated by the Working Families Tax Cuts Act, which simplifies repayment options and provides additional pathways for borrowers to rehabilitate defaulted loans. The new income-driven repayment plan is scheduled to launch July 1, 2026.
"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," said Under Secretary of Education Nicholas Kent in a statement.
The announcement represents an abrupt reversal. In December, department officials said they would restart wage garnishment in January, with initial notices scheduled to reach 1,000 borrowers the week of Jan. 7. Last spring, the Trump administration said it would resume targeting tax refunds after lifting the pandemic-era payment pause.
More than 5 million Americans were in default on federal student loans as of September, according to department data. Nearly 10% of borrowers were delinquent by more than 90 days in the third quarter of 2025, Federal Reserve Bank of New York data shows.
The Working Families Tax Cuts Act reduces the number of federal student loan repayment plans from multiple options to two: a standard repayment plan and an income-driven plan. The new income-driven option waives unpaid interest for borrowers who make on-time payments when their monthly payment doesn't fully cover accrued interest. The plan also includes matching payments from the department in certain circumstances to ensure outstanding principal decreases each month.
