Administrative wage garnishments for student loans

Employers who receive wage garnishment orders regarding defaulted student loans often wonder if a court order is needed, or if the amount of the garnishment is limited by state law. In fact, the federal provisions for student loan garnishments do not require a court order, and supersede any state laws.

The Federal government backs billions of dollars annually in education loans to students and their parents made by banks, schools, and the government itself. Most students repay their debts. However, between 10 percent and 15 percent of these borrowers do not repay their loans. Many of these borrowers are employed and able to make payments. When borrowers default, it is ultimately the taxpayers that pay the expense for their education loans.

As the agency responsible for administering the programs that provide this Federal loan financing, the U. S. Department of Education (ED) pursues collection of student loans aggressively through borrower contact, credit reporting, litigation, collection agencies and offset against Federal payments, such as Federal income tax refunds. ED also uses another tool for collection of defaulted student loans - garnishment of wages of defaulted borrowers. The Higher Education Act, (P.L 102-164; 20 U.S.C. § 1095a) authorizes ED as well as student loan guaranty agencies to collect defaulted Federally-financed student loans by means of an administrative order to the employer, and without the need for a court order. This order requires the employer to withhold and pay over to ED or the guarantor up to 15% of the debtor's disposable pay. This Federal law supersedes any state law governing wage garnishment.

ED believes that the availability of wage withholding to collect these loans encourages many employed defaulted borrowers to repay their loans voluntarily. In those cases where borrowers continue to refuse to honor their obligations, wage withholding is an effective debt collection tool. Since ED implemented its Wage Withholding in 1993, the collection of defaulted student loans has increased dramatically. Both the Department of Education and student loan guarantors have increasingly used this tool over the past several years, recovering hundreds of millions of dollars.

Relying on a separate, newer Federal law, the U.S. Department of Education can now order employers to withhold 15% of disposable pay (unless the debtor provides ED with written consent to deduct a greater amount) to satisfy loan or grant obligation(s) owed to the Department. The Department now relies on 31 U.S.C. § 3720D, enacted by Section 31001(o) of the Debt Collection Improvement Act of 1996 (DCIA), Pub. L. 104-134,110 Stat. 1321-358 (Apr. 26, 1996). The cooperation from employers has contributed and will continue to contribute to the significant results in this program. ED has worked to minimize any direct impact the program might have on your business operations. If you have any questions, please contact ED's Administrative Wage Garnishment Branch (AWG) at (404) 974-9490 or email us at awg@ed.gov.

For more information, visit https://www.myeddebt.ed.gov/.