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‘What payments can be garnished for my defaulted student loans?’ Answers to questions as collections resume

Tom Robbins by Tom Robbins
April 25, 2025
in Investing
‘What payments can be garnished for my defaulted student loans?’ Answers to questions as collections resume
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What payments can be garnished?

The U.S. government has extraordinary collection powers on federal debts and it can seize borrowers’ federal tax refunds, wages and Social Security retirement and disability benefits, according to higher education expert Mark Kantrowitz.

The federal government can intercept other funds such as state income tax refunds and lottery winnings, Kantrowitz said.

In some cases, federal student loan borrowers can also be sued by the U.S. Department of Justice, and face a levy on the funds in their bank accounts, he said.

How much money can be taken?

Social Security recipients can typically see up to 15% of their monthly benefit reduced to pay back their defaulted student debt, but beneficiaries need to be left with at least $750 a month, experts said.

Carolina Rodriguez, director of the Education Debt Consumer Assistance Program in New York, said she was especially concerned about the consequences of resumed collections on retirees.

“Losing a portion of their Social Security benefits to repay student loans could mean not having enough for food, transportation to medical appointments, or other basic necessities,” Rodriguez said.

Meanwhile, your entire federal tax refund can be seized, including any refundable credits, Kantrowitz said. Fortunately, if you’ve already received your 2024 federal income tax refund, “the government cannot claw it back,” Kantrowitz said.

As for your wages, the federal government can garnish up to 15% of your disposable pay without a court order, Kantrowitz said. Wages of federal workers may be easier to seize, he added.

How can I avoid collection activity?

Take steps to get out of default and to try to avoid the start of any garnishments, experts said.

Borrowers in default will receive an e-mail over the next two weeks making them aware of the new policy, the Education Department said. You can contact the government’s Default Resolution Group and pursue a number of different avenues to get current on your loans, including enrolling in an income-driven repayment plan or signing up for loan rehabilitation. 

Some borrowers may also be eligible for deferments or a forbearance, which are different ways to pause your payments, Rodriguez said.

“We’re advising clients to request a retroactive forbearance to cover missed payments, and a temporary forbearance until they can get enrolled in an income-driven repayment plan,” she said.

If you do end up facing the garnishment of your Social Security benefits or wages, the government is required to provide you with notice before it starts its collection activity, Kantrowitz said. For your wages, a 30-day warning is required, while 65 days’ notice must be given before the seizure of Social Security benefits, he said.

You may have the option to have a hearing before an administrative law judge within 30 days of receiving a wage garnishment order, Kantrowitz said. Your wages may be protected if your employment has been spotty, or if you’ve filed for bankruptcy, he said.

“Borrowers can also challenge the wage garnishment if it will result in financial hardship,” Kantrowitz said.

You can dispute the offsets to your Social Security benefits, too, he said, by contacting the Education Department. The notice you receive should provide information on whom to contact.

Are you worried about the garnishment of payments such as wages or Social Security benefits? If you’re willing to share your experience for an upcoming story, please email me at annie.nova@nbcuni.com.



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