Understanding Student Loan Garnishment

Wage garnishment (also referred to as “wage attachments”) refers to the process of an employer deducting a portion of an employee’s income for payment of a debt owed by the employee to a third party.

Wage attachments are court orders or orders from a state agency that direct an employer to withhold a specific amount from the employee’s wages and pay it to a creditor. The creditors that can garnish wages in Texas include:

• The government, for unpaid taxes, fines and penalties,
• Unpaid child support and alimony, (the district may charge an administrative fee of up to $10.00 per month on child support payments)
• Court-ordered child support and alimony even if not in arrears, and
• Unpaid federal student loans that have been declared in default. (the district may charge an administrative fee of actual cost or up to $10.00 per month, whichever is less)

The main legal source regarding wage garnishment is Title III of the Consumer Credit Protection Act (CCPA).

Student Loan Wage Garnishment

Student loans are generally either:

• those guaranteed by the Federal Government (including Stafford and Perkins loans)
• those from private lenders 

The main difference between the garnishment of federal and private student loans is that the Federal Government doesn’t need to obtain a court order to garnish wages.

Maximum Limits on Wage Garnishment

Depending on the type of debt involved, there are fixed legal limits on the amount of employee wages that can be withheld. Maximum wage garnishment is based on an employee’s “disposable earnings,” which is the employee’s total income after subtracting legally required deductions.

Examples of legally required deductions include:

• federal, state, and local taxes
• the employee's share of Social Security
• Medicare

Insurance premiums, charitable contributions, retirement contributions (other than those legally required) are not subtracted from total income when calculating disposable earnings.

For student loans, the maximum amount the Federal Department of Education may garnish is 15 percent of the employee’s disposable income and not more than 30 times the minimum wage. This maximum garnishment depends on the payroll schedule. The maximum,

• if paid weekly is $217.50
• if paid biweekly is $435.00
• if paid semi-monthly is $471.25, and
• if paid monthly is $942.50

Deductions for court-ordered garnishments and other wage attachments required by law may take an employee’s hourly rate of pay below the minimum wage because the FLSA generally treats wage garnishment paid to a creditor as wages paid to the employee for compliance with minimum wage and overtime pay.