Back to Top A white circle with a black border surrounding a chevron pointing up. It indicates 'click here to go back to the top of the page.'

Student loans in default? The federal government won't garnish your wages for 6 months under the coronavirus relief bill

student working
SDI Productions/Getty Images

Affiliate links for the products on this page are from partners that compensate us (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate student loans to write unbiased product reviews.

  • If your federal student loans are in default, you may have had your wages or other income garnished by the federal government to pay back what you owe.
  • As of March 13 through September 30, student loan defaulters will get a break — the federal government will pause collection efforts under the recently signed coronavirus relief bill.
  • If you've had wages garnished since March 13, you should have that money refunded to you.
  • Read more personal finance coverage.
Advertisement

If your federal student loans are currently in default, you're probably familiar with the federal government's collection efforts, including wage and tax refund garnishment. However, under the recently signed coronavirus relief bill, also known as the CARES Act, the federal government will pause all actions against student loan defaulters through September 30.

In addition to the temporary pause on collections, the Department of Education will refund $1.8 billion to 830,000 student loan borrowers from funds collected beginning March 13, the day the president declared a national emergency.

Here is a breakdown of what you need to know about what's happening with defaulted student loans.

Advertisement

Wage garnishment is put on hold 

If you have federal student loans, the government can legally come after your wages if your loans are in default. Through wage garnishment, they can take 15% of your paycheck. 

As of March 13, however, your wages should not be garnished. If your wages have been garnished since that date, you'll get your money back.

According to a release from the Department of Education, "The Department must rely on employers to make the change to borrowers' paychecks, so it will monitor employers' compliance with the request to stop wage garnishment. Borrowers whose wages continue to be garnished after March 13 should contact their employers' human resources department."

Your tax refund may not be withheld

If you haven't filed your taxes yet and your loans are in default, you're in luck. Typically, your tax refund can be intercepted as a way to pay back a loan that is in default. But currently, that motion is on pause and any tax refund you might receive will no longer be taken from you. 

Advertisement

This is only available for borrowers in default, submitting tax returns March 13 and after. If you've already had your tax refund withheld before that date, unfortunately, it won't be returned to you. 

Your Social Security benefits may not be withheld

Another way the government can come after payments for a defaulted student loan is by taking a portion of your Social Security or disability benefits. As of March 13, however, no Social Security or disability benefits will be withheld from you. If a payment was taken before this date, you won't be getting it back. 

Collection calls will stop 

The Education Department also announced that collection calls from Department-contracted collection agencies will be paused. Though collection calls will stop, you can still work with the agency if you have a payment arrangement. 

If you want to work to get out of default, you can still consolidate your loans or rehabilitate them. There's also the option to repay in full. If you want to move forward with that, you can contact the Default Resolution Group at 1-800-621-3115.

Advertisement

Interest will not accrue 

If your loans are in default, the interest can add up a lot, increasing your total balance. As of March 13 and on through the end of September, interest will not accrue on your defaulted student loans. 

What's next?

While many of these measures are in place for roughly six months as of March 13, there is still uncertainty for what's ahead. These periods could be extended. You may hear from your loan servicer when wage garnishment etc. begins again. 

Remember, these rules are for federal student loans that are backed by the U.S. Department of Education. Unfortunately, none of this applies to private student loans. 

If your loans are currently in default, now could be a good time to get them in good standing through loan consolidation or rehabilitation. 

Advertisement

If you choose to consolidate, you can choose to pay on an income-driven repayment plan where payments could be $0 if your wages are nonexistent or very low. That way you can stay in good standing and not have to be stressed about payments at this time. But if you choose to stay in default, you'll get a little break for now from these other measures to pay back the loans. 

Advertisement
Close icon Two crossed lines that form an 'X'. It indicates a way to close an interaction, or dismiss a notification.

Jump to

  1. Main content
  2. Search
  3. Account