Collections | Federal Student Aid

If you default on your federal student loan, the loan may be placed with a collection agency, which will then contact you to obtain payment.

Collections

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.

How will my outstanding debt be collected?
How do I contact a collection agency?

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?

If you fail to make (and comply with) other arrangements to repay the debt, which could include entering into a loan rehabilitation agreement, ED can use a variety of methods to collect your defaulted federal student loan. Find out more about getting out of default.

The government can collect your 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)

Federal law related to the collection of debts owed to the government requires ED to request that the U.S. Department of the Treasury withhold money from your federal income tax refunds, Social Security payments, and other federal payments to be applied toward repayment of your defaulted federal student loan. This withholding is called Treasury offset.

If you have a defaulted FFEL Program loan that is held by a guaranty agency, your state tax refunds may be also withheld and applied toward repayment of your loan, and you may lose your driver's license or other state-issued licenses.

Before the offset begins, a notice of pending offset will be sent to your last known address to inform you that the offset is scheduled to begin in 65 days. The notice may only be sent once and offsets will continue until your debt is paid.

You do have the right to request a review of your account to prevent the offset from occurring. If you are successful, then your tax refund and other federal payments will not be offset or the amount being offset may be reduced. If you are unsuccessful, then your tax refund and other federal payments will be offset.

For more detailed information about Treasury offset or the review process (including how to request a review), contact your loan holder. If you don’t know who your loan holder is, you can find out by logging into "My Federal Student Aid."

Withholding Money From Your Wages

Your loan holder can order your employer to withhold up to 15 percent of your disposable pay to collect your defaulted debt without taking you to court. This withholding (“garnishment”) continues until your defaulted loan is paid in full or removed from default.

With garnishment, you have the right to

  • be sent a notice 30 days prior to ED ordering wage garnishment that explains ED’s intention to garnish your wages, the nature and amount of your debt, your opportunity to inspect and copy records relating to your debt, your right to object to garnishment, and your option to avoid garnishment by voluntary repayment;
  • be given an opportunity to enter into a written agreement under terms agreeable to ED to establish a voluntary repayment agreement;
  • be given an opportunity for a hearing to present and obtain a ruling on
    • any objection you have to the existence, amount, or enforceability of the debt;
    • any objection that garnishment of 15% of your disposable pay would produce an extreme financial hardship; or
    • any objection that garnishment cannot be used at this time because you’ve been employed for less than 12 months after having previously been involuntarily separated from employment;
  • have the garnishment action withheld by filing a timely request for a hearing, until the hearing is completed and a decision issued;
  • not be discharged from employment, refused employment, or subjected to disciplinary action due to the garnishment, and to seek redress in federal or state court if such action occurs;
  • initiate any legal action against your employer if the employer discharges, refuses to hire, or takes disciplinary action against you based on the garnishment action; and
  • not have any information provided to your employer regarding the garnishment other than what is necessary for the employer to comply with the withholding order.

One way to avoid garnishment of 15% of your disposable pay is to negotiate repayment terms acceptable to ED or the private collection agency and ensure that ED receives the first payment no later than 30 days from the date the garnishment notice was sent.

Your other option is to make a request for a hearing. You should

  • make a hearing request in writing postmarked no later than 30 days from the date the garnishment notice was sent;
  • make a request for a hearing, even if you are requesting copies of documents, because requesting documents doesn’t delay a garnishment order;
  • provide proof to support any objection made to the existence, amount, or enforceability of the debt, or financial hardship; and
  • pay any expenses you incur to obtain legal representation and to attend an in-person hearing (All in-person hearings are held at one of the three regional offices: Atlanta, Chicago, or San Francisco. You are responsible for the cost of attending and the cost of any witnesses that attend on your behalf.)

Your loan holder will arrange the hearing. 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 about whether your wages will be garnished will usually be made within approximately 60 days from the day that your hearing request is received.

If you are successful in your hearing, then your wages will not be garnished (for a period of 12 months) or the amount garnished may be reduced (partial garnishments are reviewed annually).

If you are unsuccessful in your hearing, then your wages will be garnished at the full 15% rate allowed by law.

For more detailed information about wage garnishment or the hearing process (including how to request a hearing), contact your loan holder. If you don’t know who your loan holder is, you can find out by logging into "My Federal Student Aid."

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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.

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