Your 2026 Tax Refund Could Be at Risk if You Default on Student Loans

President Trump's Department of Education has made it clear that it plans to be much more stringent about collecting student loan debt moving forward. The news that borrowers might have their wages garnished if they default on their loans was surprising to many, and now, some are worried about what student loan repayment might mean for their 2026 taxes.

Here's what we know about whether student loans could wind up eating some or all of your 2026 tax return.

While the Department of Education has said that it might garnish people's wages or take their tax refunds if they are in default on their student loans, it announced in January of 2026 that it would be pausing those enforcement mechanisms.

In their statement, they said they would “delay involuntary collections on student loans, including Administrative Wage Garnishment (AWG) and the Treasury Offset Program (TOP).”

TOP is the program that might lead some people's tax refunds to be seized. The reason for the delay is that it will allow the Department of Education to implement two new repayment plans as well as the Working Families Tax Cuts Act.

“The temporary delay will enable the Department to implement major student loan repayment reforms under the Working Families Tax Cuts Act to give borrowers more options to repay their loans,” the Education Department said.

"These reforms, which include simplifying repayment options and providing an additional opportunity for borrowers to rehabilitate their federal student loans, reflect the Trump Administration’s commitment to provide better support for current and future borrowers in repayment," the statement continued.

Starting in July of 2026, borrowers will only be allowed to choose from one of two repayment options.

The two plans are a tiered Standard Repayment Plan and a new version of an Income-Driven Repayment Plan called the Repayment Assistance Plan. What this means, though, is that if you've defaulted on your student loans and are worried that might affect your 2026 tax refund, you probably don't have to worry, at least this year.

It's worth noting, though, that the Department of Education has not abandoned the policy of collection for those in default.

If you are in default, then, you might want to be aware of how that might affect both your take-home pay and your tax refund for next year. Repayment plans will allow some borrowers to pay off their loans, but for borrowers who have found themselves stretched thin by these loans, they might find that they wind up having funds involuntarily taken from them, which could transform how they live their lives.

Because these policies have not been implemented yet, we don't know how they might affect borrowers. What seems clear, though, is that the Trump administration plans to follow through on its promise to collect on the loans that people have taken from the federal government, whether borrowers have the funds to pay off those loans or not.