Can the Government Garnish Your Wages if You Don’t Pay Student Loans?

Can the government garnish your wages if you don't pay your student loans

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.

Image credit: lisafx

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  • Tb at BlueCollarWorkman.com

    Reason #2496 why I’m glad I never went to college. Fricken student loans. I’m very glad that this isn’t a problem of mine! Of course, I want my daughters to go to college so it’s good for me to know this kind of stuff, just glad it isnt’ affecting me yet!

    • Shannon_ReadyForZero

      Student loans can definitely be a good and bad thing at the same time! I know a lot of parents start a 529 savings plan when their kids are young to help take the burn out of tuition when they’re older, but there’s been some debate on whether these savings plans are useful. I’d be curious to hear what you think of them.

  • http://www.onesmartdollar.com/ Sean @ One Smart Dollar

    I am glad that there are safeguards so that people can;t just skip out on their payments. Even now student loan debt might be the next housing market problem. If people can take out the loans then they need to be held accountable for paying them back one way or another.

    • Shannon_ReadyForZero

      You have a good point Sean. I think the biggest problem is that it’s too easy to sign loan paperwork when you’re 18 and graduation feels a million years away. Hopefully the talk on this issue will continue to grow so students and even parents can have a good understanding of what they’re really signing on to – which will hopefully prevent defaults later.

    • Caninus Lupus

      Sean, students are not to blame for jobs sent overseas, are not to blame for the mess the banks entered in 2008. Deferment and forbearance are not to help students, are just a way for the lender to make more money if loans can’t be paid for a period of time. In most cases placing the debtor in a harder situation to pay.
      People took out loans based on a good economy and expecting a better economy. Predatory loans were issued to thousands of people, in thousand of cases including parent loans, lenders did not request income to the debtors because they knew the loans were not able to be discharged in bankruptcy; they only needed the promissory to be signed. The ones that can pay the loans off course they should pay it, but reality is very different, for thousands of students and parents Sean, and to me you seem to be in LA LA land or your degree of ignorance if heavier than your brain.

    • Meeseur Smith

      Unfortunately they are exactly that STUDENTS, last time I checked students are not very smart. They are easy prey, who are told they can be somebody, and that’s all it takes to get them to sign their life away. I was tricked and manipulated into getting a college education, I highly regret ever doing so, I should of just gotten an Associates degree from community college.

      • http://www.twitter.com/bwfeldman Benjamin Feldman

        Sorry to hear about your experience! I hope some of our resources can help you with your student loans:
        http://blog.readyforzero.com/resources/student-loan-debt/

        https://www.readyforzero.com

        • Meeseur Smith

          That’s cool dude, don’t worry I know all about the plans and deferments , and making sure to keep in contact with salliemae. But that only goes soo far you I still need an actual Job. LOL

          • http://www.twitter.com/bwfeldman Benjamin Feldman

            Ah, I understand. That is tough, but I wish you the best of luck! This resource center might be helpful to you: blog.readyforzero.com/resources/career-tips.

  • Studentbody

    I have repeatedly read throughout the internet about the exiistence of that one restriction whereby they cannot take “more than 30 times the current federal minimum wage.” So I looked up the current (October 2012) federal minimum wage, and it is $7.25. And 30 times that is $217.50. So they are allowed to garnish a max of $217.50
    My question: What is the TIME PERIOD for this restriction? Does that mean they cannot take more than $217.50 ….
    PER WEEK??
    or
    PER PAYCHECK??
    or
    PER MONTH??
    Does anyone know the answer to this restriction time period? Please understand that $217.50 per paycheck is HUGE, whereas $217.50 per month is doable. But I just cannot find an answer to this question.
    Thanks.

    • http://www.twitter.com/bwfeldman Benjamin Feldman

      I think this should answer your question (I found this information here: http://www.dol.gov/whd/regs/compliance/whdfs30.htm )

      “For illustration, if the pay period is weekly and disposable earnings are $217.50 ($7.25× 30) or less, there can be no garnishment. If disposable earnings are more than $217.50 but less than $290.00 ($7.25× 40), the amount above $217.50 can be garnished. A maximum of 25 percent can be garnished, if disposable income earnings are $290.00 or more. When pay periods cover more than one week, multiples of the weekly restrictions must be used to calculate the maximum amounts that may be garnished.”

  • latrice

    If you owe lets say 5000 in loans and you get a 7000 tax refund i know your left with 2000 after the offset but can the irs take the full 5000 or can they only take a certain percentage of what you owe and take the rest during the next year income tax

    • http://www.twitter.com/bwfeldman Benjamin Feldman

      Hi Latrice, my understanding is that they can take the full amount of your tax refund. However, you might want to call them to double check.