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Tax Offset and Wage Garnishment

If you default on your loan, the U.S. Department of Education has the authority to deduct money from your income. This may happen through tax offset or wage garnishment (or both).

Tax Offset. The Department of Education may offset, or withhold, money from your federal income tax refunds to collect on defaulted federal student loans.

If the offset of your federal tax refund creates a severe hardship for you, it is possible to request a refund. Examples of extreme hardship include very high medical expenses or the threat of eviction from your home. To request a refund, you will need an explanation of why the offset is causing an extreme hardship, a copy of your income tax form and other proof of income, copies of your monthly bills, and, if possible, copies of the bills that represent your case for extreme hardship. Send this information to your guaranty agency.

Wage Garnishment. If you have defaulted loans the Administrative Wage Garnishment (AWG) process may be initiated. AWG is when a loan holder requires that your employer withhold up to 15% of your disposable pay. If you are selected for AWG it will continue until your defaulted loan is removed from default.

With AWG you can expect the following:

  • Your loan holder will send notification of garnishment to your last known address;
  • You have twenty days from the date the notice is mailed to you to request a hearing. If you request a hearing after this time, your wages will be garnished until a hearing determination is made;
  • Your hearing will occur either in person, on the phone, or in writing; and
  • A decision will be made within approximately sixty days from the day that your hearing request is received.

The AWG process varies by loan holder. For more specific information about AWG or the hearing process please contact your loan holder. If you do not know who your loan holder is you can call 1-800 4 FED AID or visit the National Student Loan Data System for that information.

The AWG process is time sensitive. People often miss the hearing request deadline because their loan holders do not have their correct address. It is important that you always notify your loan holders of any change in address.

More Detailed Information about Administrative Wage Garnishment:

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