Posted by Carmen Garcia

How to Avoid Enforcement of Student Loan Wage Garnishment

How to Avoid Enforcement of Student Loan Wage Garnishment

The wage garnishment on a federal student loan occurs when the employer deducts part of the payment to repay the student loan after non-payment. Please note that under the Covid-19 relief programs, all federal student loan garnishments have been suspended until at least September 30, 2021.

There are countless ways to avoid wage garnishment before it begins. But once your wages start to be withheld, breaking the process becomes more difficult. In general, to end wage garnishment by means other than loan cancellation, the garnishment must have been made in error, or you must be able to demonstrate financial hardship.

However, you can request to stop a wage garnishment, such as earning minimum wage and having no extra money to spare.

Below are some of the things you need to know about wage garnishment on your federal student loan.


How student loan wage garnishment works

Before your wages can be garnished, it is expected that you have missed at least nine months of federal student loan payments, failed to respond to the default loan notice, and then not make arrangements when a loan garnishment letter is sent to you.

At that point, the United States Department of Education may send a notice to your employer to withhold up to 15% of your salary after deductions such as taxes, social security, and contributions to Medicare. The Ministry will use this money to repay your loans until they are repaid in full if you have been removed from the default, an alternate arrangement has been made to repay the loan, or if the Ministry decides to terminate the loan garnishment for other reasons.


Avoiding Federal Student Loan Wage Garnishment

Follow the steps below to avoid your loans going into default and avoid loan garnishment before it starts.


Check the status of all your loans.

If you have multiple federal loans, it's very easy to forget one or two, which could mean accidentally not paying it off. Also, this can happen if you have consolidated your loans and did not include one or more. You should always check the status of all your loans at least quarterly and make sure they are up to date, which means they will be paid off on time.

 

Respond quickly to a wage garnishment notice

The lender is required to send a letter to the borrower at least 30 days before the start of the wage garnishment. Examine the letter carefully to make sure there are no mistakes. You have the right to ask for proof that you are late on your loans. To do this, respond quickly and ask for copies of letters and documents proving that you are a candidate for wage garnishment.


Sign up for a plan to get out of the default

When you are aware of debt loans, you will no longer run the risk of wage garnishment. The Department of Education offers a program called student loan rehabilitation, where you can make nine consecutive payments based on a portion of your income.

The program is similar to income-tested payment plans and provides a minimum payment of $5 for those who qualify. After payments are made, the default amount is removed from your credit report, you can receive new student loans when you return to school, and your wages will no longer be garnished.

The rehabilitation of the student loan is considered a voluntary student loan repayment agreement. You can also choose another payment option available from the collection agency or the Department of Education. Make sure you make your first payment within 30 days of receiving the garnishment notification and other payments within the allotted time.


Reasons for disputing a wage garnishment

If you want to dispute the garnishment on your wages, you can schedule a hearing with your student loan officer. The reasons for qualifying are whether the loss of wages would create extreme financial hardship, whether you were previously unintentionally unemployed (as many were during the Covid-19 crisis), and whether you were in the new job for less than 12 months or the validity of the debt.


What happens when a federal student loan garnishment is disputed?

Once you have filed a dispute, you may end up with the garnishment suspended until the hearing is over, and a decision is made. Your employer cannot refuse to hire you or fire you because of the garnishment.

Filing a request costs nothing and has virtually no cost if the outcome of your case can be decided over the phone or simply by providing documents justifying the reason for requesting to stop the default. A more complicated hearing in one of the three regional offices of the United States Department of Education in Atlanta, Chicago, or San Francisco may incur travel costs and legal representation.


How long does it take to resolve wage garnishment cases?

The case is usually decided within 60 days of receiving the request for a hearing. Possible outcomes of the hearing include wages that are not garnished for 12 months, the amount of garnishment is reduced, or enforcement is terminated. Ending the garnishment does not mean canceling the loan. You can reach a payment plan through the Department of Education. If you are not successful with the hearing, your wage garnishment will resume at the full rate, up to 15%.


Wage garnishment of private student loan

For private student loan wages to be garnished, you typically have to be sued first. If you are currently exceeding your private student loan repayments, it is best to contact your lender as soon as possible to take steps to avoid a lawsuit.

A lawsuit may incur additional costs. If you can't afford an attorney, call your local lawyer association to find local legal clinics to help you on a small scale.

To ensure you keep track of your private student loans, check your credit report and make sure you recognize all loans listed. Also, check if someone is listed by default. If the report was made in error, you could dispute the error with the credit reporting agencies.


Bottom Line

There are ways to prevent wage garnishment. The Federal Student Loans Officer will send you a letter at least 30 days before the start of the garnishment. At this point, you can stop the garnishment by proving it was a mistake or by entering into another payment agreement.

With private student loans, you can also try to arrange payment or dispute errors. The CFPB provides sample letters to request information on debts and to dispute a wage garnishment determination.


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Carmen Garcia
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