Involuntary Collections on Defaulted Student Loans Delayed While ED Rolls Out OBBBA
By Hugh T. Ferguson, NASFAA Managing Editor
Defaulted student loan borrowers will not be subject to involuntary collections while the Department of Education (ED) rolls out provisions from the One Big Beautiful Bill Act (OBBBA), which significantly reshape the student loan program through the negotiated rulemaking process.
Many of those changes are slated to take effect on July 1, 2026, and according to a Friday announcement from ED, the delay in involuntary collections will give the department more time to implement OBBBA – referred to as the “Working Families Tax Cuts Act” – and offer defaulted borrowers more time to review their repayment options and rehabilitate their loans.
“The Department determined that involuntary collection efforts such as Administrative Wage Garnishment and the Treasury Offset Program will function more efficiently and fairly after the Trump Administration implements significant improvements to our broken student loan system,” said Nicholas Kent, ED’s under secretary.
In April 2025, the Department of Education (ED) announced it was resuming the collections process for defaulted federal student loans after a five-year pause in collections due to the Covid-19 pandemic. The collections process includes administrative wage garnishment and the Treasury Offset Program.
The Treasury Offset Program requires ED to request that the Department of the Treasury withhold money from defaulted borrowers’ federal tax refunds. Prior to Friday’s announcement, on the Federal Student Aid (FSA) website, ED detailed that defaulted borrowers’ state tax refunds could also be withheld and applied toward repayment of the defaulted loans.
ED has not provided a specific date for the resumption of involuntary collections on defaulted student loans, but has encouraged borrowers to explore their options for resolving defaulted loans. Stay tuned to Today’s News for more information on this topic.
Publication Date: 1/16/2026
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