If you haven’t made any payments for at least 270 days then you could be in default. Collection fees will be added to the balance of your loans.
In addition to wage garnishment, the U.S. Government can perform an administrative offset of your federal benefits or an interception of your tax refund without having to go to court to obtain a judgment against you (see below).
The following approaches could provide you with a way out of default:
- Private consolidation
- Federal consolidation
After trying to collect the money that you owe, a governmental agency can obtain it from another government agency that was about to mail you a check.
The administrative offset usually occurs with money owed for more than 180 days and is a form of withholding by the Treasury’s Financial Management Service. A “tax interception” is a form of administrative offset where a tax refund is taken to pay a past due student loan or other debt.
Unpaid income taxes, small business, farming as well as veteran’s health care expenses and other debts may also be collected. If your benefits were overpaid in the past, this amount may be past due as well.
The agency may be attempting to provide you with a written notice and an opportunity for inspection, review and repayment. You may be eligible for a disability and hardship waiver or other exception or legal defense.
If not, the administrative offset will become certified in which case you may receive a letter from the agency that was about to pay you which describes why the offset will occur and by whom.
Past due taxes usually take priority over other debts. Social Security may be taken for past due student loans and other government debts even if owed for more than 10 years. More and more people are having their Social Security, Black Lung, Railroad Retirement and other benefits taken. Up to 15 percent of a Social Security check may be taken but you shouldn’t be left with less than $750.
When you receive notification of a wage garnishment or tax interception, you can request a hearing and challenge their claim. A payment plan might be worked out instead. Remember, there is no statute of limitations on the collection of student loans. You could be sued if a wage garnishment is not possible – at any time in the future.