Can a Debt Collector Garnish Student Grants?

Even with the best of intentions, people find themselves in debt. When a debt collector starts the garnishment process, they'll find certain income sources exempt from garnishing. Social security, federal student grants and student loans payments are exempt from debt collection garnishments. Debt collectors may garnish federal grant funds under certain circumstances.

Protected Income Sources

The Federal Trade Commission, or FTC, lists federal benefits protected from debt collection garnishments. These include veteran's benefits, student assistance, retirement benefits, and death and dismemberment benefits. While exceptions exist, debt collectors cannot garnish money from these benefits for most types of debt. A credit card, mortgage or auto lending company cannot garnish student grants or other federal benefits.

Negating the Exemption

Federal benefits, including student grants, may be garnished only for child support, alimony, back taxes or delinquent student loans. These exceptions to the protection of federal benefits are the only ones approved without a waiver. Companies may apply for a waiver with the FTC to garnish federal benefits. The debtor is notified by the FTC and the collector of the waiver before any garnishment activities taking place. The debtor may appeal the waiver with the FTC.

Garnishments

To begin a garnishment against student grants, the court must order the garnishment. The garnishment order is sent to the financial institution, which will freeze all incoming payments and provide the required amount to the address or account on the garnishment. A copy of the garnishment order will be provided by mail to the debtor when the garnishment is issued. The debtor does not need to acknowledge the debt for their student grants to be garnished when received by the bank.

Protection From Garnishments

In the event that a student grant has been garnished improperly by a debt collector, the debtor has the opportunity to sue the debt collector. The debt may sue up to one year after the garnishment in state or federal court. The court will allow the debtor to sue for $1,000 above any damages that are proved in court as well as legal and court fees. You may also report violations to the State Attorney General's Office or the FTC.