Can the government garnish your wages if you don’t pay your student loans? The short answer is yes, but only in some cases.
Few students can make it through school without the help of student loans. Even if it is possible to get through the first four years without debt, many grad students find that they need to borrow in order to move further in education.
While student loans can be a helpful way to get the education and skills you need, you do need to be aware that you will be expected to repay them. You generally can’t include student loans in bankruptcy filings, and for federal loans in particular the government has several ways to recover the money that you owe:
Federal Government Can Garnish Wages/Paycheck
One of the tools that can be used to receive payment on your student loans is garnishment. If you are a student loan debtor, it’s possible for the government to take a portion of your paycheck.
The good news, though, is that the government is limited in terms of how much it can take. The government can only take 15% of your disposable income. Additionally, the government cannot take more than 30 times the current federal minimum wage, so even if you make more money, the government can boost what it takes from your paycheck.
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Even if the government decides to garnish your wages, you have the right to object to wage garnishment. You will need to prove some sort of extenuating circumstance, and it can help to hire a lawyer to help you fight the wage garnishment.
A simpler answer might be to contact the student loan issuer, and negotiate a repayment plan. The important thing is to show that you are willing to try to repay your obligation so that the lender is willing to work with you.
Tax Refund Offset
Another possibility is that the government can take a portion of your tax refund. If you have a tax refund coming, the IRS can intervene and take an offset. So, instead of receiving your tax refund, it is diverted to the Department of Education. This is actually one of the more popular ways that your student loan debt can be recovered.
As with the wage garnishment, it is possible to challenge your tax refund offset. However, it can be a long process, and there is no guarantee that it will prevent the government from offsetting your refund until the student loan debt is repaid.
Loss of Federal Benefits
If you aren’t paying your student loans, you will be ineligible for certain federal programs and benefits. Some of your benefits can also be garnished. This includes your Social Security retirement and/or disability benefits. The government, however, cannot take more than 15% of your total benefit, or leave you with less than $9,000 a year, or $750 a month.
On top of all of this, it’s possible for lenders (government and private) to sue you in order to collect what you owe. And, unlike other types of lawsuits, there is no time limit on when you can be sued, so a lender can try to collect at any time.
Failure to pay student loans can cause a great deal of trouble for your finances, and limit your options later on, even if the government doesn’t garnish your wages. If you can make payment arrangements with the lender that is always preferable to the consequences of default. Use the Student Loans resource center to learn more about how to pay off your student loans.
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