Lenders can garnish your bank account to recover student loan debt and they can do it in different ways depending on whether your student loans are federal or private. Here is what may occur if you default on your student loans.
Federal Student Loans
In the case of federal student loans, it is important to realize that the government does not need a court order or judgment to garnish your wages. In other cases, creditors must first sue you in court and obtain a judgement to garnish your bank account. Creditors who own your federal student loans do not have to do this. They simply must send a letter to your home address, giving you a 30-day notice that your wages are being garnished. At that point, you can request a hearing in front of a judge to make your case. If your wages are garnished, the maximum that can be withheld is 15% of your disposable income, which is the amount of your net paycheck after taxes. Your employer withholds these funds and forwards them to the appropriate creditor. This process is typically a last resort process for those who deliberately refuse to pay their loans. There are always payment plans available to help those who are unable to pay.
Private Student Loans
In the case of private student loans, or those not offered by the federal government, the creditor does not have any special wage garnishing ability. The creditor must first sue you in court to obtain a judgment, and then submit a court order to your employer with the details of the garnishment. How much they are allowed to garnish depends on the state in which you live.