(U.S.) — The U.S. Department of Education paused federal student-loan default collections in January 2026, delaying administrative wage garnishment and seizures through the Treasury Offset Program as millions of borrowers face renewed risk to Social Security benefits and tax refunds.
The pause blocks two of the government’s sharpest collection tools for now: taking money from paychecks through administrative wage garnishment and intercepting certain federal payments through the Treasury Offset Program, often called TOP. For borrowers in default, those measures can quickly cut into monthly income and annual refunds.
Social Security and tax refunds sit at the center of the concern because they can be targeted when offsets resume. A pause can delay that outcome, but it does not erase the debt or eliminate the government’s authority to collect later.
Delinquency has climbed after pandemic-era protections ended, and the current pause lands as the repayment system tightens again. A report from The Century Foundation called the pause a “band-aid on a serious wound,” warning many borrowers will default in late 2026 or early 2027 without broader fixes.
Education officials tied the collections pause to a broader set of changes that the department said it needs time to implement. The department also presented the pause as a window for defaulted borrowers to take steps that can move them out of default before enforcement restarts.
Collections had only recently returned. The government restarted collections in May 2025 after a five-year hiatus, then reversed course amid repayment challenges.
Under the January 2026 pause, defaulted borrowers received more time to consolidate loans or rehabilitate them. The department also now allows a second rehabilitation opportunity, up from one previously.
The risk for defaulted borrowers becomes more visible when TOP runs normally, because it can divert federal payments before they reach households. Borrowers can find out a refund is reduced only after filing taxes, when the amount issued does not match the expected refund.
The new wave of delinquency also reflects how the government’s transition out of pandemic-era flexibilities changed what shows up in credit data. A Biden-era one-year “on-ramp” period, ending late 2024, allowed borrowers to miss payments without those missed payments being reported to credit agencies.
Once full credit reporting returned, missed payments could surface quickly and then accelerate the path toward default. That shift can change borrower outcomes even if their underlying ability to pay has not improved.
The surge in delinquencies has also drawn attention to the repayment plans many borrowers relied on for low monthly bills. The Century Foundation warned that borrowers enrolled in the SAVE plan included a financially fragile group, with a large share qualifying for $0 payments.
With the on-ramp over and reporting tightened, borrowers who cannot keep up can see damage spread beyond the monthly bill. Defaults can harm credit, and borrowers in default face collection tools that reach into wages and federal payments when the pause ends.
Under Secretary of Education Nicholas Kent said the department supports “regular, on-time repayment” and linked the delinquency spikes to prior relief policies. His comments came as the department moves to overhaul repayment options and rein in what the administration describes as overly complex plan choices.
Department press secretary Ellen Keast pushed back on the framing of the current data, calling delinquency claims a “misnomer.” Keast also said institutions must prepare students for repayment as pandemic-era exceptions fade.
The next policy shift arrives starting in July 2026, when new rules under Trump’s “One Big Beautiful Bill Act” simplify repayment plans to a standard option or an income-driven repayment option. The changes also eliminate SAVE and Grad PLUS loans.
Borrowing limits also change, with a tighter approach for graduate students while leaving the $20,500/year undergrad limit unchanged. The overhaul further limits forbearance to 9 months/2 years and ends unemployment deferments.
Education officials presented the collections pause as part of the runway for that transition, with the pause described as supporting implementation of the July 2026 rollout. The department has not provided a specific end date for the pause beyond that connection to the new system.
The redesign reshapes tradeoffs that borrowers have used for years to stay current, especially short-term pauses that can keep an account from tipping into default. Cutting back forbearance time and ending unemployment deferments can reduce flexibility for borrowers who lose income or face sudden expenses.
At the same time, the act’s streamlined structure could reduce confusion for borrowers trying to pick a plan. Fewer choices may make it easier to understand what counts as being current, but it does not change the basic math for borrowers whose payments remain unaffordable.
The administration’s push has triggered a debate about accountability and the cost of delaying collections. Critics argue the repeated use of pauses weakens repayment expectations and undermines the overhaul meant to start in July 2026.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, called the pause an “incoherent political giveaway.” She said the approach costs billions yearly in lost collections and undercuts the 2026 reforms.
Kent and Keast emphasized a different rationale: creating space to shift the repayment and servicing system while bringing borrowers back into routine payment patterns. Their messaging also placed responsibility on schools and other institutions to prepare students for what repayment actually requires.
For borrowers, the practical stakes of the pause often come down to what happens when TOP is active again. TOP can affect federal tax refunds and certain federal payments, intercepting money to cover a delinquent debt before it reaches the person who is owed the payment.
Borrowers who depend on refunds for large annual expenses can feel that impact most acutely, especially in households already strained by rent, food prices, or medical bills. Retirees and disabled borrowers can face an additional worry if Social Security benefits are reduced once offset tools return.
Education officials have urged defaulted borrowers to contact servicers now to pursue rehabilitation or consolidation. The department also expanded rehabilitation access by allowing a second rehabilitation opportunity, which can matter for borrowers who used their one chance in earlier years.
Outside of default, the new income-driven repayment framework also includes features meant to prevent balances from growing when borrowers pay on time. The department said the new IDR waives unpaid interest for on-time payers and adds matching payments in some cases.
Even with those elements, consumer and policy groups warn that the system can still produce a steep cliff when protections expire. The Century Foundation’s report linked its warning to the expected timing after the policy transition, saying many borrowers will default in late 2026 or early 2027 without broader fixes.
The warning highlights a tension the pause cannot resolve by itself. A delay in enforcement can prevent immediate wage garnishment and TOP interceptions, but borrowers who remain unable to pay can still face the same collection authority later.
The timing of enforcement remains an open question because the pause duration is unspecified beyond supporting the July 2026 rollout. That uncertainty complicates planning for borrowers trying to decide how quickly they need to exit default, and for households that rely on predictable refunds and Social Security deposits.
For student-loan borrowers, the next year brings simultaneous shifts in repayment options, borrowing rules, and the safety valves that can keep a struggling account from collapsing into default. When collection tools resume, the Treasury Offset Program and Social Security reductions could again become the most visible pressure points in the system.
Treasury Offset Program Threatens Social Security for Student-Loan Borrowers
The Department of Education has implemented a pause on student-loan default collections effective January 2026. This move delays aggressive tools like wage garnishment and tax refund seizures. The pause serves as a transition period before the July 2026 implementation of the ‘One Big Beautiful Bill Act,’ which simplifies repayment plans but removes certain existing relief options, creating a complex landscape for delinquent borrowers.
