Trump administration reportedly preparing to restart collections on defaulted student loans: What borrowers should know

Millions of Americans in default on federal student loans could see part of their paychecks, tax refunds or federal benefits taken as the Trump administration reportedly prepares to restart involuntary collections, according to several outlets citing a report in the Washington Sun. The administration has not announced a start date, and the collections that were paused earlier this year have not been officially restarted.

This article is general information, not financial or legal advice. Contact your loan holder or Federal Student Aid about your own loans.

What’s being reported

Newsweek, citing sources who spoke to the Washington Sun, reported on Oct. 20 that officials are preparing to impose collections on defaulted borrowers in 2027 after repeatedly delaying them. The Treasury Department is moving toward hiring private debt collectors, potentially as soon as November, Newsweek said. Yahoo News, citing the same report, said three debt collection agencies would be brought in to help.

Forbes reported on Oct. 26 that the Education Department and Treasury may soon begin garnishing wages, seizing tax refunds and offsetting federal benefits administratively.

These are reports based on unnamed sources. As of this writing, the timing and details have not been confirmed by a formal announcement.

What’s official so far

In January 2026, the Education Department said it would delay involuntary collections, including Administrative Wage Garnishment and the Treasury Offset Program, while it put in place repayment changes under the Working Families Tax Cuts Act. Those changes include fewer repayment plans and a new income-driven plan that became available July 1, 2026, the department said.

Who could be affected

Nearly 10 million federal student loan borrowers are in default, Newsweek reported. Yahoo put the figure at 9.3 million. A loan is generally in default once it is at least 270 days past due, Forbes noted.

Newsweek noted that Supplemental Security Income and veterans’ benefits are not subject to the same offsets.

You should get notice first

Borrowers are not supposed to find money missing without warning. The government generally must send notice at least 30 days before starting wage garnishment, according to the NCLC as cited by Newsweek. Yahoo reported that borrowers would receive an “offset” notice that sets a 65-day window before collections start. Reports differ on the exact timing, so read any notice closely.

Options for borrowers in default

• Rehabilitation: Make nine monthly payments to bring the loan back into good standing. This can also remove the default from your credit history, Newsweek said.
• Consolidation: A new Direct Consolidation Loan pays off the defaulted debt, which can be faster, but it may affect repayment options and past progress toward forgiveness. People already being garnished may not be able to consolidate.
• Objection or hardship hearing: You can dispute the debt if it isn’t yours, the amount is wrong, or you are in bankruptcy, and you can ask for relief based on hardship.
• Discharge: Borrowers who are totally and permanently disabled, whose school closed, or who qualified for forgiveness may apply for discharge, Yahoo reported. Approval isn’t guaranteed.

Borrowers who aren’t in default yet can avoid it by staying current or switching to an income-driven plan, Forbes said.

FAQ