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Federal Student Loan Garnishment

Federal Student Loan Garnishment
Mark Cappel
UpdatedMar 31, 2010
Key Takeaways:
  • Learn more about the rules on collections of federal student loans.
  • Learn how to stop garnishment on student loans.

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

My paycheck is being garnished $25o/mo for my student loans, as well as having my income tax refund taken away. How can I stop this from happening and how can I get my return?

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 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 resource Advice on How to Stop Garnishment on Student Loans to learn more. See the 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 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.




SScott, Mar, 2020

I was 2 years into getting a degree where I took student loans to pay toward it. The university ended up killing the degree program forcing the entire student base for the degree to search for other schools. Being as less than half credits could transfer, a lot of us couldn't make the jump into starting over almost entirely. If a university does this, is there anything that us students who took loans, can do? A lot of us are still paying on loans for a degree we were never able to get, and feel that this is unfair.

DDaniel Cohen, Apr, 2020

Scott, I know there is a loan discharge program, when a school closes, for certain federal student loans. I am not aware of one for the facts you described, that the college dropped the degree program. I certainly agree that you got the short end of the stick. Did you raise the issue with the college? I am curious what they said.

While there is a common perception that you can't use bankruptcy to discharge federal student loans, there are cases that are successful. I would speak with a bankruptcy attorney who has had success in any student loan discharge.

It sounds like you are in touch with others in the same situation. Working as a group seems worthwhile. I would approach the college again and speak with them. If they are not cooperative, try and get some publicity. Student loans are a hot topic and some pressure may build on the college if the matter draws attention.

mmaria, Apr, 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?
BBill, Apr, 2014
401(k) distributions are not subject to offset.
EEric, Feb, 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.
BBill, Feb, 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.
DDIANE, Feb, 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.
BBill, Feb, 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 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.
TTina, Apr, 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?
BBill, Apr, 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 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.