What To Do If Your Wages Or Taxes Are Seized To Pay A Student Loan
Dealing with tax intercepts
Seizure of tax refunds is the most common way the government collects on defaulted student loans. There are several steps you can take to deal with this seizure. If your joint tax refund is seized to pay for your student loan, your spouse can recover some of the amount seized by filling in a simple IRS form.
You should be notified before any actual interception. This notice gives you the right to fight the intercept. Check whatever boxes are appropriate on the form (e.g. the school closed, false certification or the school defrauded you) and return it immediately, asking for a hearing. Send the form back return receipt requested as proof you sent it. (There are widespread stories of the government failing to process requests for hearings.) You will have to do this every year you get a notice.
You should also be notified after any seizure. You should complain to the Department of Education if you didn't have a chance to raise your defenses before your refund was seized.
Responding to a wage garnishment
Student loan collectors have the right to garnish a certain amount of your wages without first getting a court judgment. Student loan collectors often threaten to do this, but less frequently actually follow through. Those collectors who do follow through with garnishments rarely let you know that you have a right to challenge the seizure of your wages. There are four ways you can stop such a wage garnishment to repay your student loan:
- You can ask for a repayment agreement instead of the garnishment.
- You can stop a wage seizure if you lost your old job against your wishes and you haven't been continuously employed in your new job for a full year.
- You can stop seizure of your first $154.50 a week in take-home pay.
- You should receive a notice about your right to a hearing. Request a hearing and explain any reason why you think you need not repay the loan.