Can My Student Loan Creditor Garnish My Wages?

Student loan creditors can garnish your wages if you go into default. Whether your loan is a federal student loan or not dictates whether the creditor must first sue you in court, and how much it can garnish from your paycheck.

Here are the rules regarding garnishment for federal student loans and private student loans.

Federal Student Loans: The Government Doesn't Need a Judgment to Garnish

Most creditors must first sue you in court and get a money judgment in order to start garnishing your wages. Federal student loans, however, get special status. The government doesn't have to get a court judgment before attempting to garnish your wages. Though, if your wages can't be garnished—say you're self-employed—the Department of Justice might then sue you to collect on your defaulted loan.

How Much Can a Student Loan Holder Garnish?

Federal law allows the loan holder to garnish up to 15% of your disposable pay. You'll get a 30-day notice that explains the U.S. Department of Education's intention to garnish your wages, which explains the nature and amount of your debt, your opportunity to inspect and copy records relating to your debt, your right to object to garnishment, and your option to avoid garnishment by voluntary repayment.

Your Right to a Hearing

You get the right to request a hearing—the request must be in writing and postmarked no later than 30 days after the garnishment notice was sent—in which you may present evidence and get a ruling on:

• any objections you have to the existence, amount, or enforceability of the debt
• any objections you have because garnishing 15% of your disposable pay would create an extreme financial hardship for you, or
• any objections you have stating that garnishment can't be used at this time because you've been employed for less than 12 months after having previously been involuntarily separated from employment.

Your loan holder will arrange the hearing, which may be in person or over the phone, or based on records you submit. The garnishment will be postponed until the hearing is completed. If you aren't successful at your hearing, then your wages will be garnished. But if you are successful, then your wages won't be garnished for a period of 12 months or the amount garnished might be reduced. (Partial garnishments are reviewed annually).

According to the Department of Education, usually, you'll get a decision about garnishment around 60 days after the day your hearing request is received.

Alternative to Wage Garnishment

One way to avoid garnishment of your pay is to work out repayment terms acceptable to the Department of Education or the private collection agency. Make sure your first payment is received no later than 30 days after the date the garnishment notice was sent.

Private Student Loans

Private student loans don't have any special status, which means normal garnishment rules apply. The creditor must first sue you in federal or state court, obtain a judgment, and then submit a court order to your employer directing it how much garnish. (Learn more about the regular wage garnishment process and the wage garnishment rules in your state.)