Consequences of Defaulting on Your Federal Student Loans

If you took out a federal student loan to pay for your education and like many young Americans find yourself currently unemployed and unable to repay your loans you could be facing some serious consequences.

What recourse does the government have to collect on defaulted student loans? Seizing Tax Refunds

One action the government can take to collect on unpaid student loans is to use your tax refund to offset the amount due on your defaulted loans and they can continue to take your tax returns until the defaulted loans are paid in full. You can challenge a tax refund. To find out more information on valid reasons to challenge a tax refund visit


The government can also garnish up to 15% of your disposable income when you default on your student loans. Like in the instance of a seizure of your tax refund, you can also challenge a wage garnishment and you can find assistance on how to do so at You can also contact the holder of the loan and try to negotiate a repayment schedule.

Seizure of your Federal Benefits

Another action the government can take to collect on defaulted loans is to seize some of your federal benefits like Social Security retirement benefits and disability benefits. However, they can not take more than 15% of your total benefit.


Like any other creditor the federal government can file a lawsuit to collect on your unpaid student loans and there is no statute of limitations on filing. If you have been sued for nonpayment of student loans you should contact a lawyer immediately.

What can you do?

Besides the steps outlined above, you can also contact the Department of Education’s Ombudsman at 877-557-2575 or visit its website at You may also consider Bankruptcy. There are certain circumstances where federal student loans can be discharged in a Chapter 7 and you should contact Dailey Law Offices for a free consultation to determine whether or not your federal student loans may be qualified for discharge.