Can a Debt Collector Take College Money?

Normally, a creditor cannot take money from you without going through a legal process. If a creditor earns the right to collect a debt from you, even money you have set aside for college may be at risk. College funding is not afforded the same protection as other types of funding, such as child support. You may at particular risk for losing your college money if you hold it at an institution to which you owe money.

Lawsuits and Judgments

Even if you stop paying back a debt, your creditors do not have the right to take your money or your wages without getting the backing of the court. If your creditor is convinced you won't pay, it may file a lawsuit against you in hopes of winning a judgment. A judgment is essentially court approval for your creditor to collect money from you in payment of the debt you owe. Unless you file a successful challenge to the issuance of the judgment, your creditor will begin seeking out sources of payment, including your college money.

Garnishment

Garnishment is usually the first phase of collection after a judgment is issued. Your creditor will bring the judgment to the local sheriff's office, and the sheriff or another court representative will instruct your employer to begin garnishing your wages. Even if your job is funding your college expenses, you cannot protect them from garnishment of up to 25 percent; this amount depends on the state in which you live.

Bank Account

In addition to garnishing your wages, a creditor with a judgment against you has the right to levy your property and attach your bank account. Even if the savings in your bank account are expressly reserved for your college expenses, a creditor with a judgment and a bank attachment can clean out most or all of your bank account as payment of your debt.

Setoff

If you keep your college savings in the same bank that you owe money to, you are doing the work of your creditor for it. Banks have the right to "set off" delinquent accounts against accounts of value, meaning a bank can take your savings to the amount that you owe it money. Your bank usually doesn't even need a judgment or levy to have the right to set off your delinquent account.