RESOURCES
Stop Garnishments and Offsets
The federal government has different tools to collect on your student loans if you default. They can garnish your wages, intercept your tax refund, and offset your Social Security retirement and disability benefits. Be proactive to avoid having your income and benefits garnished.
Wage Garnishments Basics
- The government can garnish up to 15% of your disposable income for federal student loans, but they must leave you with at least 30 times the federal minimum wage, currently set at $7.25 per hour. This ensures you retain a minimum of $217.50 per week.
- Unlike other types of debt, the government doesn’t need to take you to court to begin garnishing your wages; they can do so administratively.
- You should receive a notice 30 days before the garnishment starts.
- Your employer will be notified of the garnishment and is legally obligated to withhold the specified amount from your paycheck and send it to the government.
- Wage garnishment will continue until the debt is fully paid off or until you get the loans out of default.
Tip: Read the notice carefully. It will have information about the amount being garnished, how to request a hearing, and possible defenses you may raise to stop the garnishment.
Wage Garnishments FAQs
How can I stop wage garnishments?
- Negotiate repayment: You can technically stop it by negotiating repayment and making a first payment within 30 days of the notice. Negotiate a repayment plan that is reasonable and that you can afford.
- Request a hearing: Request a hearing within 30 days from the date on your notice. You can request it after 30 days, but it may not prevent your wages from being garnished.
- Rehabilitation: Make 5 timely payments as agreed in a loan rehabilitation program and the wage garnishment will be suspended until you complete the program.
How do I prepare for a wage garnishment hearing?
Determine your defense(s) and gather proof:
- You have the burden to show your wages should not be garnished. The most common defense is economic hardship. You will have to complete a form and provide detailed proof of your finances and expenses. The hearing officer will review and compare them to the national cost of living standards. You must make a strong case for expenses that are not for basic necessities.
- There are other defenses you can explore, like school closure and being eligible for discharge due to permanent disability. The burden is still on you to show that you qualify for these defenses, usually by submitting proof that you have applied for relief or discharge.
Offset Basics
- The Department of Education and the Bureau of the Fiscal Service at the U.S. Department of Treasury work together to offset any federal benefits or tax refunds you are entitled to in order to pay off your defaulted federal student loans. Social Security Income (SSI) is exempted.
- You should receive a notice from the Department of Education or the U.S. Treasury Department explaining the intention to offset your federal payments. This notice typically arrives 65 days before the offset begins
- Offsets will continue annually (e.g., from tax refunds) or monthly (e.g., from Social Security benefits) until the defaulted loan is fully paid off, brought out of default, or you take steps to resolve the debt.
Offset FAQs
How do I prevent my Social Security retirement from being offset?
The federal government can withhold up to 15 percent of your Social Security retirement, but at no time can they leave you with less than $750 a month ($9,000 a year).
- Request a review: You can request a review within 20 days of your offset notice and 15 days from receiving documents, if you request documents to review.
- Request a hardship reduction or suspension: Instructions should be on your notice. You will need to provide a copy of your offset letter, proof that the offset would result in economic hardship, and other required documents. Here’s a sample of what is needed to request a reduction or suspension.
How do I prevent my tax refund from being offset?
The federal government can seize all or a portion of your refund.
- Request a hearing: You have 65 days from the date of your notice. You also have the right to request a copy of your loan file within 20 days of the notice. If you request your file, you will then have 15 days after your request or when you get your file to ask for a hearing. You can ask for a hearing after these deadlines, but it does not guarantee you will get a hearing or prevent the offset.
- Prepare for the hearing: You have the burden of proof. You must know what defense(s) you are raising and have documentation to support them. Possible defenses include being eligible for disability discharge, having an open bankruptcy case, and others.
Tip: Getting your loans out of default is the best way to prevent garnishments and offsets. Get help to explore your options. For tax refund intercepts, talk to your accountant to explore additional options.
What’s next?
For offsets, you can call the IRS at 800-304-3107. This is an automated system that will let you know if you have a pending offset.
Glossary
- Wage Garnishment: The legal process where a portion of an individual’s earnings is withheld by their employer to repay a debt, usually due to a court order or government mandate.
- Offsets: The process where the federal government withholds certain payments, such as tax refunds or Social Security benefits, to recover defaulted loan debts. When a borrower defaults on a federal student loan, the government may use an offset to collect the unpaid balance. This means that instead of receiving their full tax refund or benefit payments, a portion or all of the amount owed will be taken to repay the defaulted loan. Offsets are a powerful tool used by the government to enforce repayment of debts.
