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The average student loan debt has risen to $31,172, which can be a heavy weight over individuals who are ready to move on and experience life. Ignoring student loan payments for more interesting pursuits may be tempting, but defaulting on your student loans can have disastrous consequences, including wage garnishment.

If you’re one of the many Americans struggling to pay back private student loans, here’s what you need to know about wage garnishment and your options for avoiding it.

The Difference Between Federal and Private Student Loans

Federal student loans and private student loans both help you pay for your higher education, but they have distinct differences. Federal student loans have fixed interest rates, are guaranteed by the government and include a range of protections for borrowers mandated by the Higher Education Act.

Private loans, also known as alternative loans, are issued by banks and other financial institutions without any direct financial backing from the federal government. Because private loans aren’t subsidized by the government, they’re not regulated as closely and often carry higher interest rates and fewer protections for the borrower.

>> Tip: Want to reduce your student loan payments? Compare your options.

Private loans have variable interest rates and require credit checks that may necessitate a cosigner if you don’t have a good credit history. You may not be eligible for the same types of deferment, forbearance, discharge and forgiveness options as you would for federal loans. It’s wise to fully exhaust your federal loan options before looking for private loans.

What Happens If You Default on Private Student Loans

When you default on your private student loans, one of the first things lenders do is report it to the credit reporting agencies. If your loan had a cosigner, this negative mark may also go on their credit reports as well. This negative information stays on your credit reports for seven years, making it difficult for you and your cosigner to get other forms of credit or reasonable interest rates.

Lenders may then send your student loan debt to a collections agency. Debt collectors contact you and any cosigners to attempt to get you to repay your debt. You may receive several phone calls and letters demanding this payment. You might also face hefty collections fees added to your student loan debt, increasing your total balance.

You may also face a lawsuit if the lender has trouble collecting from you and decides to sue. Your cosigner is also on the hook for repayment, so they may also be named in the lawsuit. If the lender wins a judgment, they can pursue a wage garnishment against you and your cosigner.

If you think your student loans have been sent to collections erroneously, review your credit report and consult a professional for assistance.

Wage Garnishment Explained

Wage garnishments are basically a lender’s last-ditch effort to collect on the debt you owe by going after your paycheck. In most states, creditors must obtain a court order before initiating a wage garnishment, which means they must sue you and win a judgment in a court of law. Although federal student loans offer a nine-month period before your loan goes into default, the U.S. Department of Education can garnish your wages without a court order. Your employer is then required to withhold the amount garnished and forward it to your lender.

Most private student loan creditors must sue you and win a judgment in a court of law before they can initiate wage garnishment.

An administrative wage garnishment for defaulted federal student loans are limited to 15% of your disposable pay. Depending on the state, a wage garnishment for private student loans can be up to 25%. Lenders can also get a court judgment against you or your cosigner to seize assets, including financial levies on bank accounts, and place liens against property owned by either of you.

Can Your Taxes Be Garnished for Private Student Loans?

Your taxes can’t be garnished for private student loans, but tax refund garnishment is possible for federal student loans. However, if you deposit your refund into your bank account, it could be fair game to private lenders, depending on the laws in your state.

Do Private Student Loans Have a Statute of Limitations?

Private student loans do have a statute of limitations, which varies by state. Lenders can’t collect the debt through the court system once it expires. This time limit varies between three and 15 years, but the most common statute of limitation on private student loans is six years after loan default. Federal student loans don’t have a statute of limitations.

Can a Private Student Loan Be Discharged?

You can discharge a private student loan through bankruptcy, but it’s more difficult than other types of debts because of the Bankruptcy Abuse Prevention and Consumer Protection Act. The easiest way to discharge student loans is by proving that paying the loans causes an undue financial hardship. Private student loans that don’t fit the definition of a qualified educational loan could be treated like other types of unsecured debt and won’t require you to prove undue hardship.

How to Stop Loan Garnishment

If you have defaulted on your private student loan payments and your creditor has threatened wage garnishment via lawsuit, you have a few options:

  • Fight the lawsuit
  • Ask for a forbearance or settlement
  • Refinance or consolidate your loans
  • Rehabilitate your loan
  • Pursue a financial hardship
  • Pay off your debt in full
  • File for bankruptcy

Although there are more protections for borrowers of federal student loans, depending on the terms of your private student loan, you may still have access to similar options to stop a wage garnishment.

Step 1: Demand Proof

Before the garnishment is granted, demand proof that the debt belongs to you and the amount of the debt is correct. If the lender can’t produce the proper paperwork, the lawsuit can’t proceed.

Step 2: Fight the Lawsuit

“There are ways to fight and win these [wage garnishment] lawsuits,” says Heather Jarvis, a public interest lawyer and student loan expert at AskHeatherJarvis.com. “If the lender gets a judgment, they have a specific length of time in which they can enforce the judgment, but most states let lenders renew this time repeatedly.”

With the help of a legal professional, you may be able to argue that the creditor has miscalculated the amount due, charged too much for attorney’s fees or collection costs, charged fees not allowed by law, waited too long to sue you or attempted to collect more than you agreed to pay.

Step 3: Ask for Forbearance

Not all private loan lenders offer forbearance, but it’s possible to temporarily lower your student loan payments by making interest-only payments for an approved length of time. This strategy provides short-term relief, but it also increases the amount you pay back over time, and it’s typically available for only a limited time over the life of the loan.

Step 4: Ask for a Settlement

Settlements are difficult to get for private student loans and usually require a large lump sum. Most private lenders won’t even discuss a settlement until the loan is in default or written off, which means you may deal with a collection agency instead of the original lender. On the plus side, collection agencies often settle for lower amounts than the originating lender. When dealing with a collection agency, you have the same debt collection rights to fight back against abuse and harassment as you would any other debt, even if you’re in default.

Step 5: Consider Refinancing

Refinancing your private student loan once it’s defaulted makes it current again, and it may even lower your monthly payment. However, your credit score takes a hit when you default, so it could be difficult to secure a new loan.

Step 6: Consolidate Your Loans

If you have more than one private student loan, consolidating them can reduce your payments and get you caught up on those in default. Like refinancing, consolidation requires a new loan, which can be difficult with negative marks on your credit reports from defaults.

>> Tip: If you have other debts that are making it difficult to pay off your student loans, consider consolidating that debt.

Step 7: Rehabilitate Your Loan

Rehabilitating your loan requires you to make a specific number of on-time payments to prove your renewed ability and willingness to repay your debt. Borrowers with federal student loans are entitled to a rehabilitation program under federal law, but private lenders aren’t required to offer rehabilitation. The terms of your contract tell you whether this is a viable option.

Step 8: Explore Financial Hardship

If you prove to the judge that the proposed garnishment would create an extreme financial hardship, you might be able to stop private loan garnishment. You must prove this hardship through documentation, including extensive details about your finances.

Step 9: Pay Your Debt in Full

Paying your debt in full is the fastest way to stop your wage garnishment, but it’s not always possible. Defaulting on your private student loan damages your credit, so look for every possible avenue to pay off your loan, such as using your savings or asking relatives for assistance.

Step 10: File bankruptcy

It’s possible to discharge private student loans under the right circumstances. However, filing bankruptcy severely hurts your credit scores, so explore all your other options thoroughly first. If you’ve looked into other possibilities and you’re still considering bankruptcy, consult with a legal professional to discuss your options.

>>Tip: If you decide you need to consider bankruptcy, some of Lexington Law’s attorneys and of-counsels practice bankruptcy law as part of their non-credit repair work. Check out the Firm profiles for your state and see if someone could help you. You will need to call their office to schedule an appointment, as bankruptcy representation is not provided online.

Build Your Credit After Student Loan Default

If private student loan defaults have negatively impacted your credit score, learn how to fix your credit with helpful tips from Credit.com. Start by reviewing our easy-to-understand Credit Report Card that breaks down your credit report information using letter grades and two credit scores updated every 14 days for free.


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  • jessica Johnson

    Hello I have a student loan with Sallie Mae they are trying to garnish my taxes and take my cars away can they do that

  • Rob

    Can wages be garnished for private debt in every state?
    Not every state allows for private debt garnishment. If you live in North Carolina, South Carolina, Texas or Pennsylvania, you are automatically protected from this type of garnishment. This is good news. But even if you live in a state that does allow wages to be garnished, there are steps you can take to make sure it never gets that far.

  • Gillian Rolfe

    I am in an almost identical situation, and I am absolutely terrified.

  • Tina

    My student loan was discharged and approved by judge but the student loan people still have been coming after me for years and taking my income tax is this legal

    • http://blog.credit.com/ Kali Geldis

      Hi Tina —

      If your student loan was discharged in bankruptcy, you should have record of that. You should send a copy of it to the credit bureaus that are reporting the debt to get it removed from your credit reports and also send a copy of the documentation to any debt collector or student loan servicer calls you receive.


    People, create your own destiny, be self sufficient, please! Keep your money. When you create your own income you are in control.

  • http://www.Credit.com/ Gerri Detweiler

    You need to consult a consumer law attorney to find out what your rights and responsibilities are here. I assume your husband’s individual property and wages are safe since he is not the cosigner. But there may be some overlap. For example, if you file taxes jointly and you are expecting a refund it could be intercepted if these are federal loans. If you have joint bank accounts those may be at risk.

    If the lawsuit proceeds and they get a judgment that opens up new avenues of collections. Read more: I Found a Judgment on My Credit Report. Now What?

  • Guest

    Can a Private student loan lender garnish your tax return? I’m in Default with Navient. I made an initial agreement end of February. I paid $200 and was told that if by the end of March i pay $2500 to get up to date with my payments I can start making monthly payments again and will be fine. I was asked to post date a check for the $2500. I said I’m uncomfortable post dating a check for money that i am waiting for from my tax return I did not file yet. They said fine. End of March came around i haven’t received my tax return yet. I called the Navient establishment today to let them know m still waiting for my tax return only to find out since my payment of $2500 wasn’t made my initial agreement is null n void and that they are looking to take me to court. First off the teller did not tell me that if the payment won’t be made by the end of March that would happened. I was basically trying to make an agreement but working with money i did not have yet. They did say to call tomorrow to try and work something out but basically to settle for a specific amount? Is it possible they can take my tax return before it is deposited into my account?

    • http://www.Credit.com/ Gerri Detweiler

      You’re sure they are private student loans and not federal? I ask because generally tax refund offsets are used to collect federal student loans not private student loans, and Navient does collect federal student loans as well as private student loans. We wrote about student loan offset here:
      Help! My Tax Refund Was Taken to Pay My Student Loan Debt.


      That’s got to be a Private loan. Usually Fed loans don’t ask you to put money then catch up. You would go into IBR instead. I’m sure you have a Private loan so what you should tell Navient is to stick it up. Default it and walk away.

  • http://consumerrecoverynetwork.com/ask-a-question/ Michael Bovee

    Dee – Who is the loan being service by?

  • Denise Baires

    if you have a private loan in default will your taxes be garnished ?

    • http://www.credit.com/ Credit.com Credit Experts

      First, we’re not tax experts and can’t give you tax advice.

      That said, the TurboTax website has this to say:

      “If you’re expecting a tax refund but have concerns about creditors garnishing it, you may be worrying too much. Federal law allows only state and federal government agencies (not individual or private creditors) to take your refund as payment toward a debt. However, once you deposit the refund into your bank account, these rules no longer apply. Depending on the laws of your state, private creditors may have access to those funds.”

      So the answer is going to depend on state law.

  • Josh

    I have private student loans through Sallie may I heard recently that Private student loans can be included in bankruptcy since they are muchly considered the same as CC is this true?

    • Credit.com

      Unfortunately, no — this isn’t true at all.

  • Liz

    If I am in Texas, can my private student loan garnish wages against me?

    Thank you so much.

    • Credit.com

      Yes, they can.

      According to the Attorney General of Texas — it states: “Wages may be garnished only to pay debts related to court-ordered child support, back taxes, and defaulted student loans. Debt collectors cannot garnish wages for repayment of consumer debt.”

  • P. HIPA

    I was hoping your staff might have some helpful tips or information RE: filing a form for Federal loan Discharge.

    I had a long time doctor fill the form out and submit it. he Recommended that the loan be considered for discharge but I think he failed to use “Total and permanent ” language. He is a Dr. not a Lawyer.

    It seems like the agency the form went to just wanted to ignore the Doctor and argue some made up point.

    Where can I obtain another form without having to be harassed by the collections company so I can have a Lawyer or a different doctor certify the private (HIPA) medical reasons that should qualify me for discharge .

    Also, Should I employ an Accountant ( to insure it is done correctly) to prove insolvency to the IRS or other agency at the same time or — to whom and when?

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  • David Humphrey

    I was a co-signor for my brother on 2 student loans (CitiBank Student Loan Corp) in 2002, He was making payments, ended up in divorce, unemployed, etc. They were turned over to collection. The one agency, no problem with payment. The other Arrowood Indemnity Corp. turned this over to magistrate. He was making monthly payments for about 2 years, deducted from his checking. They called and wanted more money he offered $25 more making it 125 a month. They would not accept that and quit withdrawing payments. Now there is a hearing which we both have to appear. What happens now?

  • paul

    I have a loan from a bank, but i cant pay anymore, my question is – If i dont own anything why should i even try to pay anymore?

  • jeremy

    Can private student loans take you income tax from you if you are on ssi/disability and garnish your wages from you social security check each month. I am referring to permant disability and collecting a check from goverment every month

    • Michael Schreiber

      Jeremy — please post this question in forum.credit.com, and we’ll make sure the right experts weigh in…

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