Federal Student Loan Collections Delayed: What Borrowers Need to Know

Good news for millions of Americans with federal student loans in default. On January 16, 2026, the U.S. Department of Education announced it will delay plans to collect on defaulted student loans. This gives borrowers breathing room and time to explore new repayment options coming later this year.

What Does This Mean for You?

If you have defaulted federal student loans, this delay protects you from several types of forced collection actions:

Tax Refund Seizure: The government will not take your federal tax refund this tax season to pay off your student loan debt.

Wage Garnishment: You should not receive notices about having a portion of your paycheck taken to repay your loans.

Social Security Protection: Federal Social Security benefits remain protected from seizure. This protection has been in place since last summer and continues under this announcement.

Why Is the Department Delaying Collections?

The Department of Education is using this time to make major changes to how student loan repayment works. Congress recently passed the Working Families Tax Cuts Act, which includes important reforms to student loan repayment plans. These changes are designed to make it easier for borrowers to manage their loans and get out of default.

New Repayment Plan Coming July 1, 2026

A new income-driven repayment plan called RAP (Repayment Assistance Plan) will become available on July 1, 2026. While full details are still being released, the plan includes features designed to help borrowers succeed:

Interest Relief: If you make on-time payments but your payment does not cover all the interest that builds up, the unpaid interest may be waived.

Matching Payments: In some cases, the Department may make small matching payments to help reduce your principal balance each month.

Simplified Options: The number of repayment plans will be reduced, making it easier to choose between a standard repayment plan or an income-driven plan that fits your budget.

Second Chance to Rehabilitate Your Loans

In the past, borrowers could only rehabilitate a defaulted loan once in their lifetime. The new law changes this. Borrowers will now have a second opportunity to rehabilitate their loans. Rehabilitation allows you to bring your loan out of default by making a series of agreed-upon payments, which can help repair your credit and restore your good standing.

What Should You Do Now?

Even though collections are paused, your loans are still in default. The Department continues to report defaults to credit bureaus, which can hurt your credit score. Here are steps you can take:

1. Contact Your Loan Servicer: Reach out to your defaulted federal loan servicer to learn about your options for getting out of default.

2. Explore Rehabilitation: Ask about loan rehabilitation programs that can help restore your loans to good standing.

3. Consider Consolidation: Federal loan consolidation may be another path to resolve your default status.

4. Stay Informed: Watch for updates about the new RAP repayment plan and other changes coming in 2026.

What We Do Not Know Yet

The Department has not announced when collections will resume or exactly how long this delay will last. We also do not have all the details about the new repayment plans yet. As more information becomes available, we will provide updates.

Need Help with Student Loan Issues?

If you are facing student loan problems, credit reporting errors, or debt collection harassment, you may have legal rights. Our firm helps consumers understand their options and fight back against unfair practices.

Source: U.S. Department of Education Press Release, January 16, 2026

DISCLAIMER: This article is for informational purposes only and does not constitute legal advice. Every situation is different, and the information provided here may not apply to your specific circumstances. Past results are not a guarantee of future outcomes, as every case is unique and depends on its specific facts. If you need legal advice, please consult with a qualified attorney who can evaluate your individual situation.