The U.S. Division of Training pauses plans to garnish wages and seize tax refunds from defaulted debtors, aiming to implement main compensation reform.
WASHINGTON D.C., DC — The U.S. Division of Training, for now, is backtracking on plans to garnish wages and seize tax refunds of pupil mortgage debtors in default, the division introduced Friday.
Lower than a month after the company mentioned it could start garnishing wages by sending notices to roughly 1,000 debtors in default the primary full week of January, the division mentioned that the non permanent delay would enable it to implement “main pupil mortgage compensation reforms” beneath Republicans’ tax and spending reduce invoice that President Donald Trump signed into regulation in 2025.
The delay would “give debtors extra choices to repay their loans,” the division mentioned.
It was not instantly clear from the announcement how lengthy the pause would final.
Training Secretary Linda McMahon signaled earlier this week throughout the Rhode Island portion of her Returning Training to the States Tour that wage garnishment has been “placed on pause for a bit.”
The company resumed collections for defaulted federal pupil loans in Could after a pause that started throughout the early weeks of the COVID-19 pandemic.
A borrower can have their wages garnished as a consequence of defaulting on their loans, and a loanholder can order an employer to withhold as much as 15% of their disposable pay to gather defaulted debt with out being taken to court docket, based on Federal Pupil Help, an workplace of the Training Division.
The delay additionally applies to the Treasury Offset Program, which “permits the federal authorities to gather earnings tax refunds and sure authorities advantages (for instance, Social Safety advantages) from people who owe money owed to the federal authorities,” per FSA.
Aissa Canchola Bañez, coverage director for the advocacy group Defend Debtors, mentioned in a Friday assertion that “after months of strain and numerous horror tales from debtors, the Trump Administration says it has deserted plans to grab working individuals’s hard-earned cash instantly from their paychecks and tax refunds merely for falling behind on their pupil loans.”
“Amidst the rising affordability disaster, the Administration’s plans would have been economically reckless and would have risked pushing practically 9 million defaulted debtors even additional into debt,” she added, whereas pointing to a Jan. 7 letter from Defend Debtors and different organizations calling on McMahon to “instantly halt its plan to renew garnishment of hundreds of thousands of struggling debtors’ wages.”
