Identification

• A wage garnishment occurs if you default on a student loan and have no other payment plan in place to resolve the loan. According to Nolo, a legal information website, your wages can be garnished up to 15 percent of your disposable income. Additionally, the Department of Education or the guaranty agency on your loan can also initiate other means of collecting on the loan, including taking the monies from any tax return you are due to receive. In fact, the interception of federal tax returns is among the most common ways in which student loans are paid off, says Nolo.
  
  

Exceptions

• There are some exceptions to the government's seizure of your tax return monies, and that is if you can prove some kind of financial hardship that necessitates the need for that money. According to the Department of Education website, this kind of hardship is characterized by a pending eviction or foreclosure on your home or extremely high medical bills.
  
  

Process

• To avoid seizure of your tax refund for your student loans, you must provide your guaranty agency with a copy of the bill(s) that show the hardship, a copy of all of your monthly bills, a copy of your tax return and proof of income. You can also include copies of the garnishment notice to show that regular payments towards the loan are being made because of the wage garnishment.
  
  

Considerations

• Attempt to work out a payment plan with your lender that avoids either collection method. If you are able to catch up your payments, your lender may be willing to suspend a wage garnishment or refrain from taking tax return money to pay off your student loans. However, if not, there are additional steps the lender may take to get the money owed, including garnishing other federal benefits you may receive and/or pursuing a legal judgment against you.