If you are the one who have a student loan which needs to repaid but you are not able to make payments towards the same owing to the paucity of funds, you are headed for a serious trouble. The US department of Education has all the reasons to get serious about the repayment of the student loans with the figures of the student loan defaults marching ahead and crossing 3 Trillion mark. Wage garnishment can be one of the steps which the lenders could be instructed to take up. The employers are asked to with hold a portion of the students salary towards the payment of the student loans and the same gets debited from the students account directly for the payment of the student debts.
There are several student loans that the Federal Government offers to the students. It is under the Federal Student Aid Program that the students are given loans to fund their education. There are several institutions which take part into the lending program through the Federal Family Education personal installment loans or the FFEL. Other popular loans in the category include the Federal Stafford loans and the Perkins loans which are offered by the government under the direct program.
The repayment of the loans generally begins after a brief deferment period of 6-9 months once the students graduate. With reasonable rate of interest offered on them they are often the first preference of the students. The repayment of the loan has to take place regularly and the government has put in place several measures for ensuring the same. Defaulters of the loan will be treated severely. Wage garnishment is one of the ways under which an amount equivalent to 15% of the disposable income of the student is taken as penalty.
Know more about Student Loan Garnishment
Under the DCIA or the Debt Collection Improvement Act, the Federal agencies are authorized to garnish the individuals or the debtor’s disposable income even without a court order. However, in case of a Federal employee, there could be other ways of dealing with the situation. The US Department of Education is authorized to garnish the students wages up to 15% of their disposable income in the event they fail to repay the loan. All the organizations which are employing the students with a debt are required to abide by the garnishment rule in case the students get into a default.
In case an employee files for a bankruptcy, the employer is required to inform the same to the Department of Education and also instruct the student to themselves inform the government for the same. Anyone who has been proposed a garnishment can annul the same by repaying the dues within 30 days of the notification being send to them. However, those who cannot pay the borrowed amount because of the financial hardships faced by them can expect some consideration in the form of flexibility in the repayments by the ED.
There are certain conditions under which the decision of the wage garnishment could be challenged. These include cases where the student has been involuntarily unemployed for over a year. Under the guidelines set by the Consumer Credit Protection Act , there is an upper limit of 25% set for the wage garnishment of the students. In case the employee undergoing garnishment opts to move out of the organization, the employer should intimate the ED or the Education Department in writing or by phone within 10 business days, so as to enable the wage garnishment restart from the new employer where the debtor joins.
Other impact of Non-repayment of the Student Loans
In case of default by the students, they may be put on an accelerated repayment plan where they would be required to pay higher monthly installments towards the loan. In certain cases, the government may:
- Withhold the Social Security benefits to the defaulters.
- Withhold the disability benefits
- One may also be denied the FHA loans and the VA loans.
It’s evident that discharging the student loans is an obligation that cannot be taken lightly. A debtor should try to avoid defaulting and work out a system of discharging obligations in a timely and responsible fashion.
One should understand that defaulting a loan deliberately can land them in a lot of trouble. Hence one should have a proper plan in place towards the payment of the loans even before they decide to take them and in fact before they approach any of the lenders for the same.