Can the Department of Education Garnish a Veteran's Disability Pension?

Veterans disability benefits, like most other federal benefits, are typically exempt from garnishment to repay creditors. However, because the U.S. Department of Education can sometimes garnish certain federal benefits to recover debts, you may wonder if your veterans benefits are safe from garnishment for defaulted student loans.

About Garnishment

When a creditor garnishes your wages or other income, he intercepts a portion of the funds before you receive them. He applies these funds toward your unpaid debt. In most cases, the creditor can continue garnishing your income until you have paid the debt in full. While most creditors require a judgment and court order to garnish your wages, the U.S. Department of Education can garnish your income without filing a lawsuit.

Garnishing for Student Loans

The Department of Education can take up to 10 percent of your disposable income to repay your student loan debt. Disposable income includes all earned wages and non-exempt unearned income you receive after your employer deducts taxes and other withheld amounts. The Department of Education may also intercept your federal or state income tax refunds to apply toward your debt. If you are entitled to a tax refund less than or equal to the debt you owe to the Department of Education, it can garnish 100 percent of the refund.

Implications

The Department of Education can garnish all sources of income that a regular creditor can garnish. It can also garnish certain federal benefits, such as Social Security disability. However, the Department of Education can't garnish your veterans disability pension or veterans disability compensation payments, nor can they remove these funds from your bank account after you deposit them.

Considerations

Though the Department of Education can't garnish your veterans disability pension, it can still report your defaulted loans to the major credit bureaus. It can also take the non-exempt funds in your bank account, garnish non-exempt sources of income and obtain judgments against you to seize your personal property. There is no statute of limitations on student loan debt, and you can't typically discharge it in bankruptcy.