Federal AWG Deduction: What It Means and What You Can Do About It

• A federal AWG deduction means you’re in default on a federal debt, like student loans or back taxes, and the government is garnishing your paycheck without a court order.

• You’ll get a 30-day notice before the wage garnishment order kicks in. If you don’t act, your employer must start withholding from your normal pay.

• In defaulted student loans, garnishment stops after 5 on-time payments through rehabilitation, or once your consolidation is processed.

A federal Administrative Wage Garnishment (AWG) means you’ve defaulted on a federal debt, and the government is now taking money directly from your paycheck. You often see it in your pay stub as “Federal AWG (W——)”.

The Debt Collection Improvement Act allows this process without a lawsuit. The federal agency handling your loan (often through a guaranty agency) will send a 30-day notice. Once the employer receives notification, they must comply.

This debt collection process begins after the 30-day notice lapses. And just so you know, it doesn’t replace a tax refund offset. You can get hit by both.

Once you default on your federal loans, this is the process the government follows to start taking your wages step by step:

• You’ll get a formal notice first. Before garnishment starts, the federal agency (or a guaranty agency they hired) must send you a written notice within 30 days. That’s your window to submit a timely request for a hearing or a proposed repayment schedule.

• If you ignore it or miss the deadline, your paycheck gets hit. Once the deadline passes with no response, your employer receives a wage garnishment order issued by the agency, which they’re legally required to follow.

• The money goes straight to the government. Whatever amount gets pulled from your check goes to the Department of Education or the guaranty agency handling your default.

• It shows up on your pay stub. Watch for line items labeled “Federal AWG,” “DOE Garnishment,” “Fed Garn,” or something similar. That’s your missing money.

• Deductions are taken from your disposable pay. That means what’s left after taxes and required deductions like health insurance premiums, not your gross pay. Garnishment happens every pay period, whether that’s biweekly or semimonthly.

Federal AWG deductions are capped at 15% of your disposable income, in line with the Consumer Credit Protection Act. But there’s a rule to protect minimum wage workers.

Here’s how it works:

• The government can take 15% of an employee’s disposable pay, but only the amount over 30 times the federal minimum wage.

• As of May 2025, the federal minimum wage is $7.25/hour, so multiply it by 30 (7.25×30) = $217.50/week.

• If the debtor’s disposable pay is below $217.50, the government can’t garnish their wages.

• Garnishment also can’t bring the employee’s disposable pay below $217.50/week.

For example, if you take home $500 a week, 15% would be $75. But since only income over $217.50 counts, the wage garnishment amount could be anywhere from $42 to $75, depending on how your employer calculates it.

If you’re unsure how much will be taken, you can use a wage garnishment worksheet like this one to estimate your deductions based on your disposable income and pay schedule.

Absolutely. But the right strategy depends on what kind of federal debt you’re dealing with.

The strategies below are specific to defaulted student loans. If you’re facing AWG for another type of federal debt, the strategy will be different. It’s best to consult an expert depending on your defaulted federal loans.

If Garnishment Hasn’t Started

If you’re still within the 30-day window after getting the notice, here’s what to do:

• Request a hearing by following the instructions in your garnishment notice.

• Submit proof if you’re dealing with financial hardship, identity theft, or if the loan shouldn’t be in default.

• You can also argue that your loan doesn’t qualify as a delinquent non-tax debt, which is the legal category required for federal wage garnishment under federal law.

If You’re Already Getting Deductions

If garnishment is already rolling, you’ve still got options, but they won’t stop the deductions:

• You can negotiate a repayment plan, but the garnishment usually keeps going until the repayment agreement is approved and active.

• If you start loan rehabilitation, garnishment will stop after you make 5 on-time monthly payments.

• If you consolidate your defaulted loans, garnishment will stop once the consolidation is complete and processed.

• You can try to settle for less than you owe. But it won’t fix your credit or stop garnishment unless your agreement specifically says so. Most borrowers won’t qualify unless the loan is old or collections have stalled.

If you’re stuck or not getting answers from your servicer, call the Default Resolution Group. Hiring a student loan lawyer can also help you make the right decision if you’re overwhelmed and confused.

A federal AWG deduction means your federal loans are in default, and the government has started collecting through your paycheck.

It doesn’t happen out of nowhere; you’ll get a notice first. But many ignore or are unaware of this notice. If you miss the 30-day window, the deductions begin automatically.

If you’re dealing with a defaulted federal student loan, you can challenge the garnishment if you act quickly, or start a process like rehabilitation or consolidation to stop it and get out of default for good.

If you’re not sure what makes the most sense in your situation, we can help.

Book a call with our student loan expert today.

We’re here to give you clear, personalized guidance on how to stop garnishment for your defaulted student loans.

Related reading:

• How to Stop Student Loan Wage Garnishment

• Can Social Security Be Garnished for Student Loans? [2025]

• Can My Spouse’s Wages Be Garnished For My Student Loans?

• Can Inheritance, IRA, or 401(k) Be Garnished for Student Loans?

• Can Student Loans Take Money From Your Bank Account?