Many students must take out student loans to finance the often expensive tuition required to attend college. When a student takes out these loans, he is obligated to pay back this money according to the terms set by the government -- the primary issuer of student loans. If you are late paying your loans, the government may hire a collection agency to help collect your debt, but it doesn't have to before it garnishes your wages.
College Tuition
When a person takes out a student loan, it will, in most cases, be from the federal government, which sponsors the vast majority of student loans in the country. However, in some cases, a person may take out a private student loan from a group other than the government. In either case, if you don't pay what you owe, then the loan will go into default and can be treated like any other bad debt.
Collection Agency
As with other loans issued by private firms, the government may choose to hire a collection agency that specializes in the collection of overdue debts to help it collect on a debt that has not been paid off. If the government does so, it will only be because you were late on making your payments. While usually the government will attempt to collect the money through an agency before suing you in court, this is not an obligation.
Garnishing Income Tax
Before the government can garnish your income tax, you have to be in technical default on your loans. This means that you go 60 days without any payments made on the loan. Only after you have gone these two months can you face garnishment. Also, only the government can garnish your income tax payments. A private lender is not allowed to garnish your income tax payments, even for a defaulted student loan.
Considerations
There is no law that demands that the government agency to which you owe money -- be it for a student loan or for another type of debt -- go to a collection agency before taking out money from your income taxes. However, you will likely receive ample warning before the government attempts to garnish money owed to you in your income tax refunds, so it shouldn't come as a surprise.
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