Can Private Student Loans Garnish Your Wages? How It Actually Works

Private student lenders cannot garnish your wages automatically. Before any paycheck can be taken, the lender must sue you in court and win a judgment.

That legal step is the dividing line. Default alone is not enough. Until a court enters judgment, private lenders can call, send letters, and demand payment—but they cannot touch your wages. This process is fundamentally different from federal student loan garnishment, which follows a separate system.

Private student loan wage garnishment only becomes possible after a court judgment. Unlike the federal government, private lenders do not have the power to take money from your paycheck on their own.

Here’s what that means in practice.

A private lender must first file a lawsuit against you in state court. You must be properly served with notice of that lawsuit and given an opportunity to respond. If you answer the case and defend it, the court decides whether the lender is entitled to judgment. If you do not respond, the court may enter a default judgment against you.

Only after a judgment is entered can a private lender ask the court for permission to garnish wages. At that point, garnishment is no longer a collection threat—it becomes a court-ordered enforcement tool. Your employer is then legally required to withhold a portion of your pay and send it to the creditor.

Missing payments or going into default does not automatically lead to garnishment. Default is a contractual issue between you and the lender. Garnishment is a legal remedy that exists only after the court process is complete.

1. You fall behind and the loan goes into default. The lender (or a collector) can call, send letters, and demand payment. Your wages still cannot be touched yet.

2. The lender files a lawsuit in state court. A private lender has to sue before it can use wage garnishment.

3. You are served and given time to respond. Service is the formal notice that starts the court deadline clock.

4. The court enters a judgment (either after litigation or by default). If you respond, the court decides the case. If you do not respond, the court may enter a default judgment.

5. The lender requests a wage garnishment order. The judgment is what allows the lender to ask the court to enforce the debt through garnishment.

6. Your employer withholds part of your paycheck. Once an order is issued and delivered to your employer, the employer is required to comply and send withheld wages to the creditor.

Even after a private lender gets a court judgment, there are limits on how much can be taken from your paycheck. Garnishment is regulated by a mix of federal law and state law, and the stricter rule applies.

Here are the rules that matter.

• Federal law caps most wage garnishments at 25% of disposable earnings. Disposable earnings are what’s left after legally required deductions like taxes and Social Security—not your take-home pay after rent or bills.

• Some states protect more of your income. Many states set lower caps than federal law, and a few states severely restrict or prohibit wage garnishment for most consumer debts. State law can make a significant difference.

• The limit applies per paycheck, not per loan. If multiple private student loans are covered by the same judgment, the total garnishment still cannot exceed the legal cap.

• Garnishment does not reduce your pay below a protected minimum. Federal law protects a baseline amount of weekly income, even when garnishment is active.

• There is no automatic hardship adjustment. Unlike federal student loan garnishment, private lenders do not have an administrative hardship hearing process. Any reduction or exemption depends on state court rules.

Related: How to Stop Federal Student Loan Wage Garnishment for Financial Hardship

There are only a few ways to stop a private student loan wage garnishment. Each works at a different stage of the process, and the timing matters.

1. Respond to the lawsuit before judgment. Wage garnishment is impossible without a court judgment. If you respond to the lawsuit on time, you prevent a default judgment and force the lender to prove its case. That alone can stop garnishment from ever starting.

2. Settle the loan before or after judgment. Many private lenders will negotiate a settlement, especially once litigation begins. A settlement can stop a pending lawsuit or end an active garnishment if the creditor agrees to release the judgment as part of the deal. The tradeoff is usually a lump sum or short payment schedule.

3. Challenge the judgment if there’s a legal defect. If you were never properly served, or if the judgment was entered incorrectly, state law may allow you to ask the court to vacate it. If the judgment is undone, the legal basis for garnishment disappears with it.

4. File bankruptcy. Bankruptcy triggers an automatic stay that stops wage garnishment immediately. What happens next depends on the type of bankruptcy and the nature of the loans, but the paycheck deduction must stop while the case is active.

Private lenders do not have an administrative shortcut. Every option that stops garnishment works by interrupting or undoing the court process.

Once a wage garnishment order is active, it stays in place until something legally interrupts it. The lender does not need to reapply every pay period. Your employer keeps withholding wages and sending them to the creditor under the same court order.

Changing jobs does not erase the judgment. The creditor can request a new garnishment order against a new employer once it learns where you work. Interest may also continue to accrue on the judgment balance, depending on state law and the terms of the court order.

Garnishment ends only if the judgment is satisfied, the court order is lifted, or the debt is otherwise resolved through settlement, vacating the judgment, or bankruptcy. Until one of those happens, the order remains enforceable.

Related:

• How to Negotiate Student Loan Settlement

• How to File Student Loan Bankruptcy