Financial Counseling Certification Program (FiCEP) Practice Exam

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Prepare for the Financial Counseling Certification Program. Use our test with multiple choice questions and explanations to boost your confidence and excel in your exam. Start today!

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True or False: Social security wages may be garnished if a federal student loan is in default.

  1. True

  2. False

  3. Only if other debts are delinquent

  4. It varies by age

The correct answer is: True

Social Security wages can indeed be garnished for federal student loan defaults, making this statement true. The law allows the federal government to take a portion of Social Security benefits to recoup unpaid federal student loans. This applies specifically to federal loans, which are backed by the government, distinguishing them from other types of debts where garnishment may not be permitted. When a federal student loan goes into default, the Department of Education has the right to use various collection methods, including administrative wage garnishment of Social Security benefits. This is an important aspect for borrowers to understand, as it highlights the potential consequences of failing to repay federal student loans. The other options reflect misunderstandings regarding the specific circumstances under which student loans can lead to garnishment. For example, stating that it varies by age does not align with the legal framework governing garnishment of Social Security benefits, which is consistent regardless of age. Similarly, the notion that garnishment occurs only if other debts are delinquent is misleading, as the process for federal student loan debt is distinct and does not depend on the status of other debts.