If you default on your federal student loan, the entire balance of the loan (principal and interest) may become due in a single payment. This is called acceleration. Once your loan is accelerated, the holder of your loan—a guaranty agency, the U.S. Department of Education (ED), or the school that made the loan—may place your loan with a collection agency.
If your loan is placed with a collection agency, you will be responsible for costs incurred to get payment. The holder of your loan can take other actions to collect as well.
If your federal student loan is in default, check out the Student Loan Debt Collection Assistant, which ED developed in partnership with the Consumer Financial Protection Bureau. The tool provides information about how to access the full range of special repayment options available to you.
How will my outstanding debt be collected?
ED has the authority to collect a defaulted federal student loan. The government can collect this debt by withholding money from the following sources of income:
- your income tax refund and other federal payments
- your wages
Withholding Money From Your Tax Refund or Other Federal Payments (Treasury Offset)
The U.S. Department of the Treasury, at ED’s request, can withhold money from your federal income tax refunds, Social Security payments, and other federal payments to collect your defaulted federal student loan. This withholding is called Treasury offset.
Withholding Money From Your Wages
Your loan holder—ED or the guaranty agency—can order your employer to withhold up to 15 percent of your disposable pay to collect your defaulted debt. No court judgment is needed. This withholding (“garnishment”) continues until your defaulted loan is paid in full or removed from default.
With garnishment, you can expect the following:
- Your loan holder will send you notice of the proposed garnishment at your last known address.
- You have 30 days from the date of the notice to object to garnishment. You must object in writing and request a hearing. If you do so after the 30-day period, garnishment will be initiated and will continue while your objection is considered and a decision issued.
Your loan holder arranges a hearing on your objection. The hearing may be held in person or on the phone or may be based simply on records you submit to make your case. A decision on your objection should be made within approximately 60 days from the day that your hearing request is received.
For more specific information about garnishment or the hearing process, contact your loan holder. If you do not know who your loan holder is, you can look up your federal student loans using ED’s National Student Loan Data System (NSLDS®).
If you’re a federal employee, ED may arrange offset, through the Federal Salary Offset Program, of up to 15 percent of your disposable pay to collect a defaulted student loan. You have the right to object to the offset and have a hearing held on your objection.
Find out what to do if you believe your loan has been placed in default by mistake.
How do I contact a collection agency?
ED, for the loans that it owns, currently contracts with several collection agencies. If you’ve heard from a collection agency but aren’t sure how to get in touch with them, find collection agency contact information.