How To Protect Your Paycheck From Federal Student Loan Garnishment

The U.S. Department of Education announced on April 21, 2025, that it would restart enforced collection of defaulted federal student loans on May 5, 2025, for the first time in five years.

During the pandemic, the Coronavirus Aid, Relief and Economic Security (CARES) Act not only paused payments and waived interest on federal student loans, but also suspended involuntary collection of defaulted federal student loans. These provisions were extended multiple times, and then followed by a 12-month on-ramp that retroactively placed delinquent loans into a series of 3-month administrative forbearances. This ended on September 30, 2024.

Of the 7.7 million borrowers who were in default prior to the pandemic, 5.3 million remain in default. If you are among them, you should know that the U.S. Department of Education has very strong powers to compel repayment of defaulted federal student loans. These include Administrative Wage Garnishment and the offset of income tax refunds and Social Security disability and retirement benefit payments.

Make sure you understand how wage garnishment works and what you should do if you receive a notice.

How does Administrative Wage Garnishment work?

1. The ED sends a notice

Administrative Wage Garnishment typically begins after a 30-day notice to the borrower. If you have a serious delinquency or are in default on your federal student loans, update your contact information with the U.S. Department of Education and your loan servicer to ensure you receive any notices concerning your debt.

The wage garnishment notice will be mailed to the borrower’s last known address. The U.S. Department of Education does not need the borrower’s current contact information to start wage garnishment, as they can get the name of the borrower’s employer through tax records. The wage garnishment order will be sent to the borrower’s employer.

2. Employer begins withholding wages

Once AWG begins, the U.S. Department of Education can require employers to withhold up to 15 percent of a borrower’s disposable pay to repay defaulted federal student loans, without needing a court order.

Disposable pay refers to what’s left of the borrower’s wages after deducting health insurance premiums and any amounts required by law, such as taxes. After garnishment, the borrower must be left with at least 30 times the federal minimum wage per week (currently $217.50). This is intended to ensure that the borrower can pay for basic living expenses.

If the borrower is already subject to garnishment for other reasons, the combined garnishment amount can exceed 25 percent of disposable pay.

Can I be fired for having my wages garnished?

Federal law protects borrowers from employer retaliation. An employer cannot terminate or take disciplinary action against an employee solely because of Administrative Wage Garnishment. Should an employer retaliate, the borrower can file a lawsuit seeking attorneys’ fees, back pay, reinstatement and punitive damages.

3. Garnishment continues until the owed amount is repaid

Garnished amounts are applied first to collection costs, then to interest and finally to the principal balance of the defaulted loans.

Wage garnishment continues until the entire amount owed by the borrower, including interest, penalties and collection costs, is paid in full. If any excess amounts are garnished, they will be refunded to the borrower. However, the ED does not pay interest on such refunds.

How borrowers can respond to an Administrative Wage Garnishment notice

Borrowers have options for avoiding Administrative Wage Garnishment if they act quickly.

Look out for collections scams

Borrowers who are in default should beware of student loan scams. Some scams will pretend to be debt collection agencies and demand hundreds of dollars from the borrowers’ wages. Wage garnishment orders are sent by the federal government to the borrower’s employer, not the borrower. You can verify suspicious demands for payment by contacting the Default Resolution Group at the U.S. Department of Education.

Request a hearing

Borrowers who receive a notice of Administrative Wage Garnishment should ask to see records relating to their debt, to ensure that the balance due is accurate. They should also evaluate whether they have grounds for an appeal and promptly file a request for a hearing before an administrative law judge if so.

If this request is filed within 30 days of receiving the garnishment notice, the hearing must occur before the wage garnishment order is issued. For requests filed after the 30-day window, the hearing may take place after the garnishment begins. The hearing official is required to issue a final written decision within 60 days of the petition’s filing date.

• Common grounds for appeal

  • • Job loss. If a borrower was involuntarily separated from their employer, Administrative Wage Garnishment cannot be imposed until they have been continuously employed for at least 12 months.

  • • Financial hardship. Borrowers can challenge Administrative Wage Garnishment if it will result in financial hardship, which is defined as “an inability to meet basic living expenses for goods and services necessary for the survival of the debtor and his or her spouse and dependents.” Basic living expenses include essential expenses like food, rent, utilities, clothing and medical bills. Borrowers may be required to provide documentation of income and basic living expenses, which will be compared with the IRS Allowable Living Expense (ALE) for families of the same size and income. If the borrower’s basic living expenses are higher, they must prove that the higher amounts are reasonable and necessary. Documentation of eviction or foreclosure, utility disconnection and homelessness can be helpful. A successful appeal based on financial hardship may result in a reduced wage garnishment amount or a temporary suspension.

  • • Bankruptcy. Administrative Wage Garnishment is suspended when a borrower files for bankruptcy and remains suspended until the bankruptcy proceedings have concluded.

  • • Rehabilitation. If a borrower has successfully made five qualifying monthly payments under a loan rehabilitation agreement, the Administrative Wage Garnishment will be suspended.

  • • Debt paid in full or discharged. Garnishment will end if the borrower provides proof that the debt has been paid in full or discharged.

  • • Incorrect amount of debt. Borrowers can dispute the amount of the debt by presenting evidence of a different amount that is owed.

  • • Non-existence of the debt. Borrowers can dispute the existence of the debt by providing proof that no debt exists or that the debt is not their responsibility.

  • • Not delinquent. A borrower can challenge the wage garnishment by proving that the borrower is not delinquent or in default on the debt.

If an appeal is granted, it usually results in a temporary suspension of the wage garnishment, so the borrower may need to submit an appeal annually.

Enter a repayment agreement

If the borrower has Direct Loans, the borrower can enter into a loan repayment agreement or loan rehabilitation agreement with the U.S. Department of Education’s Default Resolution Group. If the borrower has FFEL program loans, the borrower can make arrangements with the guarantee agency that holds the borrower’s defaulted loans.

Rehabilitate defaulted loans

You can return the loans to a current status by rehabilitating them. Entering a rehabilitation agreement and making your first payment within 30 days of the date listed on your AWG notice will prevent wage garnishment.

There are two methods of rehabilitating defaulted federal student loans. One involves making 9 out of 10 consecutive, on-time, full, voluntary, reasonable and affordable payments as part of a loan rehabilitation agreement. This type of rehabilitation removes the default from the borrower’s credit history.

Removing the default from the borrower’s credit history will make it easier for them to get a credit card, auto loan or mortgage.

Consolidate the defaulted loans

A quicker method to remove loans from a defaulted status is to include them in a Federal Direct Consolidation Loan. Consolidating your defaulted student loans restores them to a current status immediately and stops wage garnishment.

However, this method has a few drawbacks:

• Consolidation adds the interest and collection costs to the loan balance.
• Consolidation does not remove the default from the borrower’s credit history.
• The borrower may be required to repay their loans under an income-driven repayment plan.

Learn more

If you have questions about your student loans, you can call the Federal Student Aid Info Center (FSAIC) at 1-800-433-3243.

If your loans are in default, contact the Default Resolution Group at the U.S. Department of Education at 1-800-621-3115 or visit myeddebt.ed.gov for guidance about getting out of default, rehabilitating federal student loans and wage garnishment.