Date: June 6, 2012
Posted In: DLP Law

Robert had graduated from college with close to $100,000.00 in student loans. Unfortunately he was unable to find a job and he could not stay current with the payments on his loan. Delinquency begins the first day that a borrower misses a payment on a loan such as this. Robert remained delinquent for over nine months and at that time his student loan became what is known as “in default.”

             Robert had filed an income tax return since he finally got work and he was expecting a $2,500.00 refund. Unfortunately, the Department of Education was able to seize Robert’s tax refund. As it turns out, every year the IRS receives a report from the Department of Education with a list of student loans in default. Before a tax refund is turned over to the Department of Education, Robert would have received a notification that he had the option of either paying the debt or appealing the offset. Since Robert had no reason, other than the fact that he did not have the money, he did not appeal and lost his refund.

             Not only could the Department of Education take this action, but they were also entitled to garnish wages that Robert earned from his employer without even the necessity of a court judgment prior to garnishment. There is a limit though of $217.50 that the Department can garnish per week.

             The Department of Education vis-à-vis the Debt Collections Improvement Act allows the government to take some Social Security benefits from a student loan borrower in default as well or even revoke or suspend, in some states, certification licensing for medical professionals, attorneys, teachers and state officers.

 Disclaimer: The above article is for instructive purposes only and each case is fact sensitive.  Consultation with an attorney should be obtained instead of reliance upon the legal issues discussed in this column. 



Cal Leventhal
Cal is a graduate of the University of Miami (magna Cum Laude) and attended Loyola and Notre Dame law schools graduating in 1976. He is admitted to the Bars of the Supreme Court of Pennsylvania and both state and federal trial and appellate courts situated in Pennsylvania.