Federal Student Loan Garnishment

How do I stop the federal government from garnishing my wages and seizing my income tax return?

Read full question
Calculating Debt
Bill's Answer: Answered by Mark Cappel

Federal education loan programs define a default as occurring after 270 days of non-payment. To stop garnishment of wages and seizure of income tax refunds, contact the U.S. Dept. of Education, work out a payment plan, and then stick to it.

Student Loans & Default

Under Stafford or Perkins loans, the Dept. of Education guarantees that if the student defaults on the loan, the federal government will reimburse the school or bank that loaned you the money, to cover the school’s or bank’s losses. In turn, the federal government will take steps to collect the money from you that it was forced to pay to the lender. The federal guarantee of these loans allows lenders to provide loans without rigorous credit checks and to offer much lower interest rates than would be offered on many conventional loans.

Quick Tip: Need a student loan? See the Bills.com resource Student Loans resource page. Problem with a student loan? Learn more about Student Loan Consolidation.

However, banks and schools must abide by a long list of federal regulations to participate in federal student loan programs. If too many alumni of a certain school default on their loans, the school can lose the eligibility to accept students with federal student loans.

Student Loans & Garnishment

Private student loans must follow the 25% rule that limits the amount that judgment-creditors may garnish. Garnishments for federal student loans, however, follow different rules. Congress granted the Dept. of Education the ability to garnish 15% of the wages of a federal student loan debtor administratively. What does administratively mean? The Dept. of Education may garnish the wages of delinquent debtor without holding a hearing and does not need to follow local state or federal exemption limits. See the Dept. of Education document Administrative Wage Garnishment to learn more.

If the garnishment causes a hardship for you and your family, you can request a hearing to change or remove the garnishment. See the Dept. of Education document Request for Hearing (PDF) to learn more.

For federally insured loans, the Dept. of Education can take various actions against debtors to enforce defaulted obligations. Unlike other creditors, the federal government has the ability to garnish wages, levy bank accounts, and seize property without first obtaining a court judgment against the debtor. As long as you are on default on your federal student loan, you are not going to receive your tax refund. It will be diverted to pay your student loan debt. You can try adjusting the amount you have withheld on your paycheck, so you don’t end up with a large refund that you won’t get. You might be curious to know how long this can go on. There is no statute of limitations on federal student loan debt that stops the Dept. of Education from collecting a delinquent student loan.

Where to Learn More

See the following to learn more about the rules surrounding collections on federal student loans and wage garnishment. (Editor’s Note: Since this article was written, big changes have taken place regarding federal student loans. Since 2010, private lenders no longer issue federal student loans, which are now issued by the Dept. of Education through the Direct Loan Program.)

See the Bills.com resource Advice on How to Stop Garnishment on Student Loans to learn more. See the Bills.com resource Student Loan Payment for a more detailed discussion of these issues. If you are disabled and are paying a federal student loan, see the Bills.com resources Student Loan Disability and Federal Student Loan Tuition Waiver. If you work in public service and have federal student loans, read Public Service Loan Forgiveness to learn how to have your student loans waived.

I hope this information helps you Find. Learn & Save.




Rate this article
Not helpful

Comments (12)

Maria L.
Dexter, MO  |  April 08, 2014
Am currently in default and have set up a 9 month payment plan. I am cashing out my 401 k...can they take that like they do tax refunds?
April 09, 2014
401(k) distributions are not subject to offset.
Eric P.
Carmichaels, PA  |  February 10, 2014
Bill, I filed my taxes online, then 2 weeks later, I agreed to a rehab program with PHEAA. 2 days later, IRS "Where's My Refund" said that PHEAA intercepted my entire refund. Can they do that if they specifically said they would not take my refunds or attach my wages? Please help as I was counting on using the reufnd to pay electric and gas bills.
February 10, 2014
It appears that the IRS had already diverted your refund before they were informed of an agreement with PHEAA was in place. I don't know if you have any recourse, but I suggest that you call both PHEAA and IRS Office of the Taxpayer Advocate 877-777-4778.
Grand Blanc Twp, MI  |  February 06, 2013
I am 65 and I have defaulted on a SLMA student loan. I received a final warning notice before garnishment and need to address this quickly. I receive Social Security and a very small annuity from old service at GM. I have medical problems that are considered limiting but not terminal. What are my consequences if I am garnished.
February 06, 2013
Sallie Mae originated private and federal student loans in the past, and originates private student loans today. Your first task is to learn if your loan is federal or private. Check the Dept. of Education’s National Student Loan Data System (NSLDS) to see if the loan is federal. If it is not, then it is a private loan. See the Bills.com articles Private Student Loan Default and Garnish Social Security Benefits? to learn your rights and liabilities.

If the student loan is federal, your Social Security benefits are subject to wage garnishment, which the Dept. of Education and other federal agencies call offset. You have little to lose by applying for a Administrative Wage Garnishment Hearing where you can outline your living expenses and argue in favor of no offset or a reduced offset amount.
Tina B.
Las Vegas, NV  |  April 07, 2012
I cannot find a job in teaching and am working aprt time as a server/waitress. I made 13,000. last year and Sallie Mae garnished 25% of my pay and charged me 1,260 in interests. Out of the 12,000. that I owe it is down to 11,500 now after paying for a year. I barely make 10% in tips. I don't get a paycheck and I average 50.00 a day in tips. I am unable to pay my bills. At this rate of paying 500 off a year it will take me 6.5 years to pay it off and never get a paycheck? Can I do anything?
April 10, 2012
You asked your question on the federal student loan page, so I will assume Sallie Mae is the servicer for your federal student loan. You have many options to avoid administrative offset, which is another way of saying wage garnishment for a federal debt. See the Dept. of Education's Income-Based Repayment Plan and Loan Rehabilitation pages.

If your loan is private, see the Bills.com Sallie Mae Forbearance & Deferment page. Consult with a lawyer in your state to learn more about your state's limits on wage garnishment. If you cannot afford a lawyer, call your county bar association and ask for the names of the organizations that provide no-cost legal services to people with low or no income in your area. Make an appointment with one of the organizations, and bring all of the documents and letters you have regarding the debt to your meeting. The lawyer you meet will advise you accordingly.
Bonny C.
January 07, 2012
My husband is listed (fraudulently) as a cosigner on his daughter's Sallie Mae loan. We've been getting numerous phone calls from Sallie Mae because the daughter quit paying. We know he's going to have to file charges of identity theft against his daughter to have his name removed as cosigner - but in the interim, will our income tax return be attached because of the loan default? Thanks for any insight!
January 08, 2012
It is impossible to answer your question without knowing the exact details of the loan. In general, cosigners are required on private student loans, and not federal student loans. Your income tax refund can be garnished if it is a federal student loan, but cannot be garnished if it is a private school loan. Sallie Mae, did in the past originate both federal and private student loans. Today, they service both types of loans.

I recommend that you contact the lender and clarify the type of loan they claim you have cosigned. Demand to receive a notification by mail, and not by telephone. Read the Bills.com article about debt validation If you have any legal questions, including ones regarding identity theft, then consult with a lawyer who has civil litigation experience.
September 27, 2010
Consult with an attorney about filing a Chapter 13 bankruptcy. It may be possible to temporarily (five years or so) modify the amount of payments you make on your student loan while in the Chapter 13 plan.
Dianna .
September 25, 2010
my wages are being garnished by a collection agency. I tried to work something out with them, but they will not budge. They want me to pay, in addition to, the garnishment another $371 a month for 9 months to get my loan out of default. There is no guarentee that the loan will come out of default if no lender will buy the loan. I cannot afford $700 a month in loan payments. They will not offer me any other alternative. My loans were stafford loans. Is there anything I can do to stop the garnishment and make a reasonable payment per month? This fight has gone on for 10 years and I'm pretty fed up with it! No one will help me.
Waiting for comments to load Loading more comments
Thanks for your feedback!

Get Help Now!


Tool Box   Easy to use resources to help you find solutions to your money questions