1. They can garnish up to the amount of the refund you would be recieving on your tax return, or up to the amount of the Student Loans you wife owes.
2. Yes, there is. You can file a Form 8379, Injured Spouse Form, along with your return. You'll basically split the income, deductions, exemption and credits between your wife and yourself (for instance, if you were the only one to have wages, you'll report all the wages for yourself).
Whatever portion of the refund is your wife's (if she has any portion) will be applied to her debt, while the rest would be refunded out to you (barring any debt of your own) that you are eligible for.