FAQ – Wage Garnishment Information for Employers

The information below is for employers who receive an official notice to garnish an employee’s wages due to a defaulted student loan.

Frequently Asked Questions about administrative wage garnishment (AWG)

1. What if I am already honoring another garnishment order on my employee’s disposable pay, do I still have to comply with the AWG Order?

Yes, but the amount you must withhold may be reduced. The law (15 USC §1673) imposes a maximum of 25% of the employee’s disposable pay. So if that current garnishment is taking, for example, 20%, the AWG Order (assuming it is next in time) is still operable to the extent of the remaining 5% of the employee’s disposable pay.

On the other hand, if the prior garnishment(s) account for 25%, then nothing would have to be withheld under the AWG Order, at least until the prior garnishment(s) was satisfied or expired.

NOTE 1: The Federal law also protects from garnishment a “floor” level of income equal to 30 times the Federal minimum wage per week.

NOTE 2: Some garnishments expire (AWG Orders do not) even before the full amount has been paid, and once a prior garnishment expires (or is satisfied), the next in time garnishment usually takes over.

2.The AWG Order is not signed; do I have to honor it?

Yes. The law (20 USC §1095a) does not require that the Order be signed to be valid and legally binding. However, if you have any questions about the Order’s authenticity, please contact the Administrative Wage Garnishment Compliance Branch at (404) 562-6013.

3. My state law forbids wage garnishment, so can I ignore the AWG Order?

No. Federal law (20 USC §1095a) specifically preempts State law and authorizes AWG.

4. What are the consequences if I fail to comply with the AWG Order?

A non-compliant employer will be liable for, and subject to, suit by the Department to recover any amount that the employer fails to withhold after receipt of the AWG Order, plus attorneys’ fees, costs, and, in the court’s discretion, punitive damages.

5. Can I impose a fee for administering this? If I can, who pays?

That depends on the state; some states permit the imposition of a fee or charge on the employee. Federal law does not address the issue. Check your state law or contact your State Attorney General.

6. A private collection agency is representing themselves as a branch of the federal government. Is this legal?

Yes. U.S. Department of Education (ED) contracts with private collection agencies.  They are not operating under a guaranty agency; therefore, their authority is direct from the Secretary of Education. Note that the Order is on the letterhead of ” the U.S. Department of Education, not the private collection agency.

7. The AWG Order is against me, and I handle payroll. What happens if I decide not to garnish my salary.

You are not the employer; you are an employee; however, if you fail to garnish your wages, then your company has refused to comply with the U.S. Department of Education’s (ED) wage garnishment order. (see question 4)

8. I was advised by our company attorney (or by the Comptroller General’s office) not to honor the administrative wage garnishment order. Who should I listen too?

Please note that 20 U.S.C. § 1095a states that an employer’s failure to comply with this wage garnishment order will make the employer liable for any amounts not withheld as well as for any collection costs incurred by ED as a result of legal action taken. Again, federal law overrides all state laws concerning student loan wage garnishment.

9. The borrower’s salary is currently garnished to pay off another defaulted student loan from the state education department. Do we have to wait until after that garnishment order is satisfied in full before implementing this latest U.S. Department of Education’s wage garnishment order?

Please note that 15 U.S.C. Section 1673 imposes a maximum garnishment of 25% of an employee’s disposable pay; therefore, both garnishment orders (e.g., each taking 10% of disposable pay) can be satisfied simultaneously.

10. The employee’s salary is subject to a prior garnishment, and our company policy is only one garnishment at a time.

If the first in time garnishment results in a withholding of less than 25% of the employee’s disposable pay, the U.S. Department of Education’s (ED) wage garnishment order is still operable to the extent that you garnish no more than 25% of the employee’s disposable pay (either single or multiple garnishments).

For example, if a current garnishment is 12% of disposable pay, the ED can collect the full 10% under 20 U.S.C. § 1095a. On the other hand, if the prior garnishment garnishes 20% of the employee’s disposable pay, then ED may collect only 5% until the prior order is fully satisfied or terminated. The bottom line, if you have more than one garnishment order and one of them is from the U.S. Department of Education, then you must withhold wages up to a maximum of 25%.

11. I have deducted the amount given to me on the first order, should I stop garnishing the employee’s wages?

No. Interest and fees continue to accrue on the unpaid principal balance. Your balance will not reflect the interest and fee accrual. ALWAYS contact the U.S. Department of Education before you stop the deductions (404) 562-6013.

12. My employee resigned and took a job with a new company. What should I do?

Notify the U.S. Department of Education of the borrower’s work status, including the last date of employment, current address, and your tax ID number. Also, if available, provide ED with the employee’s new employment information.

13. Our state law prevents wage garnishments (or requires a court order or levy before a garnishment can occur). Do I still have to comply?

Yes. Your state law is not a valid reason to not withhold because of the wage garnishment statute, 20 U.S.C. § 1095a expressly preempts any state law. For your convenience, the U.S. Department of Education (ED) attaches a copy of this statue to all AWG. Please refer to the language of the statute that reads “notwithstanding any provision of state law…” 20 U.S.C.

Employers with additional questions about wage withholding for defaulted student up should contact: Administrative Wage Garnishment Compliance Branch, 404-562-6013.

Other resources: 

Federal Website for Student Aid

Federal Website for AWG