Louisville, Ky. – The U.S. Department of Education has temporarily halted wage garnishments for borrowers in default on their federal student loans, a reprieve announced after plans to resume the practice in January 2026 sparked concern among advocates and borrowers. The pause comes amid ongoing challenges for individuals navigating a complex student loan system, and follows a period of significant policy shifts and pandemic-era relief measures.
The potential resumption of garnishments would have impacted borrowers at least 270 days late on their loan payments, according to Jennifer Finetti, a college finance expert with ScholarshipOwl. Finetti noted that the frequent changes to student loan policies, influenced by shifts in presidential administrations and the COVID-19 pandemic, have created confusion for borrowers.
Borrowers facing default have several options to regain positive loan status. According to Finetti, one path involves making nine consecutive, on-time monthly payments through an arrangement with their loan servicer. Another option is loan consolidation, which typically requires only three on-time payments. The U.S. Department of Education provides resources for managing federal student aid and identifying loan servicers at studentaid.gov.
The University of Louisville participates in the William D. Ford Direct Loan Program, allowing eligible students and parents to borrow directly from the U.S. Department of Education. These Direct Loans include Subsidized, Unsubsidized, and PLUS Loans, with repayment handled directly through the Department of Education. Students seeking to utilize these loans must complete required steps, including loan acceptance in ULink and fulfilling entrance counseling and Master Promissory Note requirements with the Department of Education.
Avoiding default is crucial, as it can negatively impact credit scores and hinder future financial opportunities, such as securing a mortgage or auto loan. The government retains the authority to garnish wages, seize tax refunds, or offset other federal payments to recover defaulted loan amounts. Finetti emphasized that student debt is tricky to discharge through bankruptcy.
The Department of Education is required to provide a 30-day notice before initiating wage garnishment, sending it to a borrower’s last known address. Borrowers are responsible for ensuring their contact information is current with their loan servicer.
Recent improvements to the Public Service Loan Forgiveness (PSLF) program, announced by the Department of Education, include a one-time payment count adjustment intended to bring borrowers closer to forgiveness. These adjustments were expected to be completed by July 1, 2024, according to Edfinancial Services, a federal student loan servicer.
President Trump’s administration had planned reforms to student loan repayment starting in July 1, and Finetti suggests the potential for garnishment resumption may be tied to the implementation of those reforms. The Department of Education has not yet announced a firm date for the potential reinstatement of wage garnishments.
