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1.4.3 Seizure of Student Loan Funds Generally Prohibited

Student assistance funds, including loans, grants, and work assistance, may be garnished to collect debts owed to the Department of Education.144 However, these funds (or property traceable to them) cannot be garnished by other collectors.145 For example, a private collection agency pursuing a student for credit card debt cannot garnish or attach that student’s federal student loan funds to collect the debt. These student assistance funds also cannot be seized through administrative offset.146 At least one court has held that student loan funds do not lose their exempt status once deposited in a private account.147

Footnotes

  • 144 {144} 20 U.S.C. § 1095a(d).

  • 145 {145} Id.

  • 146 {146} 31 U.S.C. § 3716(c)(1)(C). See, e.g., Ashton v. Knepp, 2014 WL 3845117 (M.D. Pa. Aug. 5, 2014) (prisoner’s claim that prison officials violated HEA in seizing funds traceable to federal student grant for inmate account survived motion to dismiss).

  • 147 {147} Brindle v. Arata, 940 N.E.2d 320 (Ind. Ct. App. 2010) (a contrary conclusion would effectively eviscerate the protections of § 1095a and render it all but meaningless). See also In re Drescher, 2013 WL 4525232 (D. Or. Aug. 27, 2013).