In 2021, federal student loan garnishments were generally paused due to COVID-19 emergency relief measures. The Federal Student Aid (.gov) agency extended the suspension of collections, including wage garnishment and tax refund offsets, through September 30, 2021, and later extended this protection into 2022.
Under federal guidelines, a loan is considered in default if payments have not been made for roughly seven months. Once in default, the government may garnish up to 15% of a borrower's net income, with the amount automatically deducted from their paycheck.
Federal loans are handed to the CRA, who can garnish wages, keep tax refunds, and withhold benefits without a court order. Provincial loans may go to collection agencies, who can contact you and report missed payments to the credit bureau.
For the 2025 tax year, you can deduct up to $2,500 in student loan interest as an adjustment to income, but it's subject to income limits: the deduction phases out for single filers with a Modified Adjusted Gross Income (MAGI) over $85,000 (fully gone at $100,000) and for married couples filing jointly over $170,000 (fully gone at $200,000). This deduction covers both federal and private loans for qualified higher education expenses, and you don't need to itemize to claim it.
The "7-year rule" for student loans generally refers to when negative marks, like defaults, are removed from your credit report (around 7 years after the first missed payment or default date for federal loans, 7.5 years for private loans), but the debt itself doesn't disappear and must be paid off; it's also a benchmark in bankruptcy proceedings where federal loans can become dischargeable after 7 years from when payments were due, though proving "undue hardship" is required and difficult.
You should receive notice if your refund is going to be offset. If you haven't received notice, contact your student loan provider to determine if they intend to offset your refund.
And as of January 2026, federal student loan wage garnishment is restarting. Employers will be responsible for garnishing employees' wages if they are in default. Federal student loan wage garnishments resume in 2026 for borrowers in default; employers must withhold when ordered.
As long as you stay eligible for repayment assistance, the balance of your loan will continue to be paid down until it is paid in full. The maximum amount of time a borrower can be in repayment after leaving school in most cases is: 15 years, and. 10 years for persons with a disability.
Canada's base limitation period is six years; however, many provinces have lowered that time limit to 2 years. Is it legal for a debt collector to pursue a 20-year-old debt? Unfortunately, the answer is yes.
Federal Income Benefits – Canada Pension Plan (CPP), Old Age Security (OAS) and Guaranteed Income Support (GIS) and Employment Insurance (EI) payments distributed either by cheque or direct deposit are exempt from garnishment by non-government creditors.
If you repay your loans under an IDR plan, the end of term balance on your student loans may be forgiven after you make a certain number of payments over 20 or 25 years (240 or 300 monthly payments). Use Loan Simulator to compare plans, estimate monthly payment amounts, and see if you're eligible for an IDR plan.
If you ignore the lawsuit, it is likely that a default judgment will be issued against you. This means that the government will automatically win and could get a lien on your house, seize money from your bank accounts, and garnish your wages.
Understanding student loan debt and garnishment
Through a process known as Treasury Offset Program (TOP), the federal government can offset up to 15% of your Social Security retirement benefits to repay defaulted federal student loans.
If your student loans are in default, you are at risk of having your wages garnished for collection. Your federal student loans generally go into default if you have not made payments for more than 270 days.
If the government gets a judgment against you, then it could put a lien on your assets, including your home. The easiest way to stop student loans from taking your home is to stay out of default.
Defaulting on student loans can damage your finances, but it will not lead to arrest or jail. To be clear: No Arrest Warrants: Debt collectors cannot have you arrested.
Do student loans go away after seven years? While negative information about your student loans may disappear from your credit reports after seven years, the student loans will remain on your credit reports — and in your life — until you pay them off.
Yes, federal student loans can be garnished, meaning the government can take up to 15% of your disposable wages, federal tax refunds, and Social Security benefits without a court order once you are in default (typically after 270 days of non-payment), though collection actions have seen recent policy changes and pauses, so acting quickly to contact your servicer when notified is crucial. Private student loans also risk garnishment but require the lender to sue and get a court judgment first.
You can call the Default Resolution Group at 1-800-621-3115.
You can find more information and set up an account with the Default Resolution Group to manage your requests online at myeddebt.ed.gov.
In California, private student loan lenders usually have four years to sue for missed payments. Some loans fall under a six-year rule, depending on whether the contract is treated as a written agreement or a negotiable instrument under the state's commercial code. Nationwide, student loan statutes of limitations vary.