The U.S. Department of Education announced it is delaying wage garnishments and involuntary collections for defaulted student loan barrowers, including the Administrative Wage Garnishment (AWG) and the Treasury Offset Program (TOP). The department claims its temporary pause was made to continue streamlining the student loan repayment process as it continues to make further reforms.
This pause will come as relief for around 5 million borrowers who have defaulted on their student loan payments, which means they haven’t paid debts for at least nine months or 270 days. When the loan officially enters default, it becomes eligible for mandatory collections. The current pause does not have an end date.
Student Loan Collections Efforts in Flux
The Trump administration announced in April 2025 that it would resume collection activity on student loans starting in May. Before that announcement, collections had been paused since 2020 in response to the Covid-19 pandemic. After the initial announcement about collection efforts, the agency has changed course on the policy several times. In June, it paused the plan to garnish Social Security payments. Then in December 2025, the department confirmed around 1,000 borrowers would receive notification of intent to garnish wages during the week of Jan. 7, 2026, with more notices to follow.
What Employers Need to Know
When an employer receives a student loan wage garnishment order, they face several mandated responsibilities:
Immediate Responsibilities
- Process garnishment orders as soon as received (no court order required).
- Calculate the employee’s “disposable earnings” (gross pay minus legally required deductions like taxes).
- Withhold up to 15% of disposable income.
- Notify affected employees about the garnishment.
- Begin withholding from the next available pay period.
- Send garnished funds to the agency specified in the order.
Ongoing Requirements
- Continue garnishment until receiving an official release or the debt is paid.
- Recalculate withholding if employee income changes.
- Maintain proper documentation of all garnishment activities.
- Ensure total garnishments don’t exceed legal limits (25% across all garnishments in most cases).
- Manage priority order if multiple garnishments exist.
The process differs from typical debt collection garnishments in critical ways. Most significantly, federal student loan garnishment is an administrative wage garnishment that doesn’t require judicial process. This means employers must implement these orders immediately upon receipt, with no court validation required.
How We Can Help
We take the complexity out of wage garnishment management so employers can stay compliant without stress. Wage garnishments can quickly become a costly and time‑consuming burden when handled incorrectly, carrying both financial and legal risks. By partnering with us, clients gain a trusted team that manages the entire process from start to finish, ensuring every requirement is met accurately and on time.
Our software provides intelligent withholding prioritization, making sure the most sensitive garnishments are addressed first and processed correctly. We also streamline remittance through automated payment transfers, eliminating the risk of missed deadlines or forgotten agency payments. Together, these capabilities give employers confidence, reduce administrative strain and keep payroll operations running smoothly. Discover how straight forward wage garnishment can be, connect with our team.
