Breaking News: Wage Garnishment Is on Hold
On January 16, 2026, the U.S. Department of Education made a major announcement. The government has paused wage garnishment and other collection actions for defaulted federal student loans.
This means the government will not take money from paychecks right now, even for borrowers who are already in default. For millions of Americans, this pause offers some much-needed breathing room and a chance to fix student loan problems before stricter rules begin later this year.
What Is Wage Garnishment?
Wage garnishment happens when the government takes money directly from your paycheck to repay unpaid student loans. This happens before you receive your salary, so you feel the impact immediately.
Federal student loans go into default after 270 days without payment. Once that happens, the government does not need a court order. Employers are legally required to send part of your pay to the Department of Education.
The government can take up to 15% of your after-tax income. For example, if you take home $1,000 a month, as much as $150 can be taken automatically.
What Was the Original Plan ?
In December 2025, the government announced it would restart collections in January 2026. Notices were supposed to go out starting January 7, beginning with about 1,000 borrowers, and expanding every month after that.
A small number of letters were sent, but before the program could fully begin, the Education Department decided to stop everything.
Why Did the Government Delay Garnishment ?
Officials say the system needs fixing before collections restart.
The pause gives time to:
- Create simpler repayment plans
- Help borrowers exit default
- Prepare for new loan rules starting July 1, 2026
Education leaders have openly called the current system “broken” and want collections to work more fairly once reforms are in place.
How Many Borrowers Are Affected ?
The scale of the issue is massive.
- Over 5 million Americans are already in default
- That number could grow to 9 million
- More than 42 million people hold student loans
- Total student loan debt exceeds $1.6 trillion
This is why the pause matters so much. Restarting garnishment too fast could push many families into serious financial trouble.
What Happens When a Loan Is in Default ?
Default triggers several serious consequences. Even though collections are paused now, these risks still exist once the pause ends.
| Consequence | What It Means |
| Wage Garnishment | Up to 15% of your paycheck can be taken |
| Tax Refund Seizure | Your refund can be used to repay loans |
| Social Security Reduction | Part of benefits may be withheld |
| Credit Damage | Lower credit score, harder to get loans |
| Fewer Repayment Options | Loss of flexible payment plans |
What Borrowers Should Do During This Pause
Doing nothing is the worst choice. This pause is temporary, and action now can protect your income later.
Loan Rehabilitation
Rehabilitation lets you make nine monthly payments based on your income. After completing them on time:
- Your loan returns to good standing
- The default mark is removed from your credit report
- Wage garnishment stops (or never starts)
If you apply within 30 days of a garnishment notice, garnishment can be avoided entirely.
Loan Consolidation
Consolidation combines defaulted loans into a new Direct Consolidation Loan. This:
- Ends default immediately
- Allows access to income-based repayment plans
- Is faster than rehabilitation, but default stays on your credit report
Income-Driven Repayment Plans
These plans base your payment on how much you earn. If your income is low, your payment could be very small or even $0. Enrolling keeps loans out of default once fixed.
Important Changes Coming July 1, 2026
Big changes are on the way, and they will make student loans stricter.
From July 2026:
- Only two repayment plans will remain
- Some forgiveness programs will end
- Zero-dollar hardship payments may disappear
- Lifetime borrowing limits will apply
- Some loans may move to the U.S. Treasury for collection
This is why fixing loans before July is critical.
How to Check Your Loan Status
Visit StudentAid.gov and log into your account. You can see:
- Whether your loans are in default
- Who your loan servicer is
- What options are available to you
You can also call your loan servicer directly for help.
Where to Get Free Help
Contact the Default Resolution Group at the Department of Education. Their help is free, and they can explain rehabilitation, consolidation, and repayment options.
Use the Loan Simulator on StudentAid.gov to see what your monthly payment might look like under different plans.
Be careful of scams. No legitimate company needs payment to help with federal student loans.
Reactions From Experts and Groups
Consumer advocates support the pause, saying immediate garnishment would be financially dangerous for families already struggling with rising costs.
Some budget groups criticize the delay, arguing it could cost billions each year. Others say the focus should shift from loans to more student grants in the future.
The Bottom Line
The pause on wage garnishment is a second chance, not a permanent fix.
If your student loans are in default, this is the best time to act. Rehabilitation, consolidation, and repayment plans can protect your paycheck and your future.
The pause will end. The rules will get tougher.
Use this time wisely and get your student loans back on track—before the government starts taking money from your paycheck again.
