Wage Garnishment and Student Loans: What You Need To Know (2024)

What happens if you don’t pay your student loans? It’s a common question, especially when money is tight and you’re trying to prioritize paying bills. However, there are steep consequences for skipping loan payments. Late payment fees can stack up and, if you miss too many payments, lenders can garnish your wages.

Wage garnishments—when your employer is required to withhold a portion of your paycheck to repay outstanding debt—is rising steadily. The National Bureau of Economic Research (NBER) reported that overall wage garnishment rates have increased significantly over the past few years, primarily due to rising student loan garnishments.

However, the process that creditors must take to garnish student loan payments can be extensive, and there are multiple ways to avoid wage garnishment altogether.

What Is Student Loan Wage Garnishment?

Student loan wage garnishment is a consequence of defaulting on your student loans. When you enter default, your loan servicer will report the loan status to the major credit bureaus, which impacts your credit, and they can send the account to collections.

Depending on your loan type, the servicer may be able to use wage garnishment to recoup the money you owe. Student loan wage garnishment is a legal proceeding where an employer is required to withhold a percentage of a worker’s pay to repay their student loan debt.

If the lender garnishes your wages, the garnishment stays in place until your loan is paid in full or you work with the lender to get out of default.

Can Your Wages Be Garnished for Student Loan Repayment?

Can a lender garnish your wages if you default on your student loan payments? The answer is yes, and the practice is increasingly prevalent. According to the NBER, the percentage of workers with wages garnished for student loan debt doubled between 2017 and 2019—the last data available before the federal student loan payment freeze went into effect in 2020.

However, when your wages can be garnished—and the process leading up to garnishment—differs based on your loan type.

Federal Student Loans

If you have student loan debt, you likely have federal loans. According to a report released by Enterval Analytics, federal loans make up nearly 93% of outstanding student loan debt.

The consequences of defaulting on federal loans are usually severe. Your loans enter default once you are 270 days or more delinquent with your payments. Unlike other forms of debt, federal loan servicers can garnish your wages without a court order if you default on your loans.

However, there’s an important caveat: Through September 30, 2024, the consequences for defaulting on your federal student loans are relaxed. During this period—designed to ease borrowers back into repayment after the payment freeze—loan servicers will not report your loans as delinquent to the major credit bureaus, nor will they garnish your wages. Due to this change, no federal loan borrowers will have their wages garnished until at least October 2024.

Private Student Loans

Private student loans are less common than federal loans and make up just 7% of outstanding student loan debt. But private loan borrowers should be aware that they enter default sooner than they would with federal loans; private loans are considered in default if your payment is late by as few as 90 days.

However, private student loan lenders cannot garnish your wages without a court order. The lender must sue you and receive a judgment in their favor before garnishing your wages.

How Much Can Be Garnished for Student Loans?

How much your wages can be garnished depends on the type of loans you have and your state of residence.

Federal Loan Wage Garnishment Maximum

For federal loans, the maximum wage garnishment amount is 15% of your disposable income.

The law defines your disposable income as your earnings after the legally required deductions are made, such as Social Security, Medicare, federal, state and local taxes. Other deductions, such as health insurance, life insurance, charitable contributions and retirement contributions, aren’t included in that calculation.

Private Student Loan Wage Garnishment Maximum

For private loans, the maximum percentage for wage garnishment varies by state, but your wages could be garnished by as much as 25% of your pay.

Typically, your wage garnishment percentage is the lesser of 25% of your pay and 30 times the federal minimum wage. If your weekly take-home pay is 30 times the federal minimum wage or less, you’re exempt from garnishment.

For example, the federal minimum wage is currently $7.25 per hour. According to the law, your weekly disposable income must be over 30 times the minimum wage (30 x $7.25/hr=$217.50). If your income is less than $217.50 per week, you’re exempt from wage garnishment.

How Do You Get Out of Student Loan Wage Garnishment?

If your loans are in default, the lender or loan servicer will send you a notice of wage garnishment. If that happens, consider these options:

Appeal Due to Financial Hardship

If you have a significant financial hardship—for example, if you’re facing foreclosure on your home—you may be able to request an end to wage garnishment by contacting your loan servicer and supplying supporting documentation.

Negotiate Payment Terms

If you receive a wage garnishment notice, contact the collection agency or loan servicer to negotiate repayment terms. If you can come to an agreement on a new payment schedule, you may be able to avoid wage garnishment.

Request a Hearing

You have the right to request a hearing before the wage garnishment goes into effect. To request a hearing, you must submit a written request no later than 30 days from the date of your notice.

During the hearing, you may be able to avoid wage garnishment or have the amount of garnishment reduced for one of the following reasons:

• You don’t believe the student loan belongs to you, or it was taken out without your consent.
• A wage garnishment of 15% of your pay would produce an extreme financial hardship, such as being unable to afford your rent or mortgage.
• You were laid off from work and have been employed in a new role for less than 12 months.

For federal student loans, all hearings must take place in either Atlanta, Chicago or San Francisco. Hearings can be held in person or over the phone.

You’re responsible for supplying all documentation, and you may have to pay added fees for legal representation.

If you’re successful, the court may elect to not garnish your wages , or it may agree to a reduced garnishment percentage. If your hearing is unsuccessful, the original garnishment amount will apply.

Get Your Loans Out of Default

You can end wage garnishment by getting your loans out of default. There are four ways to do that:

• Rehabilitation. This approach involves working with your lender to make a number of consecutive, on-time payments under a rehabilitation agreement. Once you meet the required number of payments, the loans are out of default.
• Student loan refinancing. An option for both federal and private student loan borrowers, refinancing allows you to pay off your existing loans in full and replace them with a new loan with different terms. However, your credit is likely damaged since you’re in default, so you’ll probably need a co-signer to qualify for student loan refinancing. And if you refinance federal loans, you’ll lose eligibility for federal protections like income-driven repayment.
• Repayment. Another way to get out of default is to pay off the loans in full. That may seem impossible, but some borrowers accomplish it by borrowing money from loved ones, selling valuables or tapping into emergency funds or retirement accounts. Withdrawing cash from your retirement fund or taking on additional debt is risky, so exhaust all of your other options first.

Important: Rehabilitation isn’t available to federal loan borrowers right now. Instead, borrowers can take advantage of the Fresh Start program. Fresh Start is a one-time, temporary program for borrowers in default. It gets your loans out of default and allows you to choose a new repayment plan that could potentially reduce your monthly payment amount.

Once the Fresh Start program ends, rehabilitation will be available to borrowers again.

How To Prevent Wage Garnishment

Wage garnishment is a serious problem, and there are ways to prevent it from happening in the first place. If you’re at risk of falling behind on your payments, take the following steps:

Apply for an Alternative Repayment Plan

If your payments are too high, contact your loan servicer to see what other options are available. Some private lenders offer alternative payment plans to borrowers experiencing financial difficulties, such as a job loss or you may be able to restructure your loan with a longer term to reduce your monthly payment amount.

With federal student loans, you may be eligible for an income-driven repayment (IDR) plan. These plans base your payments on a percentage of your discretionary income, and some borrowers qualify for $0 payments, meaning they don’t have to pay anything, and they aren’t delinquent on their debt.

You can view your federal loan payment options and apply for an IDR plan online.

Request Forbearance or Deferment

If you’ve lost your job, have major medical bills, or are facing other financial issues, contact your loan service about potential forbearance or deferment options. In some cases, you may be able to pause your payments while you get back on your feet.