Student Loan Wage Garnishment – Keep away from defaults

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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.

Comments: 9

  1. Casey April 22, 2014 at 6:44 pm Reply

    I have a federal student loan that is in default because I was unemplyed for along time after I gor out of college plus with credit card debt. I have a wage garnishment and I want to get undefaulted. I pay $300 a month in wage garnishment and they want another $170 per month as a regular payment for nine months and I can’t afford it. I worked with Sallie Mae and they can get me a monthly payment of $183 per month and not $500. But they want three consecutive payments before they will accept it and I can’t afford the payments with the wage garnishment. Illinois Student Assistance Commission won’t help me out at all about getting rid of the garnishment so I can pay the monthly fee and garnishments don’t count. Is there any way I can do something so that the feds aren’t screwing me over.

  2. Shenna April 28, 2014 at 2:37 am Reply

    My fiancee before we were together had two student loans totaling around $12,000, which she defaulted on. Over the last year and a quarter, she started with wage garnishments and a monthly payment owed to NCO Financial Systems. Over that course, her garnishments stopped and was given only a monthly payment. During her loan rehabilitation time, NCO sent her a congratulations letter and then was sent back to Sallie Mae where the original loan was. Then, Sallie Mae immediately sold and consolidated the loan to Fedloan. Now, she is back to the original amount owed with 6.875% interest. So, essentially this whole time nothing was paid on the balance. Now, Fedloan seems behind the times because they sent a bunch of things to the wrong address and they keep pushing her to give a bank account to automatically withdraw minimum payments every month. I said no, that we wanted statements and mail in a check, so now she has to go through a forbearance while they send out the statement to the correct address. It seems like it is turning into a nightmare, on that loan with the interest (more than double the original balance) will take 15 years or 180 monthly payments. What I want to know if there is legal help, as in a special term of legal people or advice experts that specialize in a defaulted loan. We want to get help in knowing we are not getting jerked around and essentially these companies collect their fees and then sell it off to someone else and we are back to square one. I also want to know what we can do to lower the interest rate. I understand paying more a month will cut down the interest, but it almost seems criminal in the interest accrual (granted she did default a loan, so no taking away of her faults). I apologize for the long reading, I just want some websites that can help us get on the correct path. Thank you.

  3. Lucio May 1, 2014 at 11:24 pm Reply

    Can they send you behind the prison ?

  4. Alfred May 3, 2014 at 1:32 pm Reply

    just cannot afford it..

  5. Lenard May 6, 2014 at 2:46 pm Reply

    I found out, about a week ago that my student loans had been placed into default ($18,000) – The company holding the loans is DCS out of California.

    To my dismay I found out (according to the woman caller) that they were going to seize my Federal Tax Return, and that if i didnt enter into a Voluntary Payment Program, that they would start docking my pay 15%

    To date I have entered into a payment plan that is comfortable for me by giving a sizeable downpayment.

    Here is my ultimate question:

    This morning I checked my bank account, and to my surprise my federal tax return had been depositied.

    Once it is deposited can this DCS company still take it away from me?

    Did they not act quickly enough?

    Can I be happy about this money, or can they still come take it away from me?

    Or – Was this all just threats on her part to get me to volunteer to pay? I understand that LEGALLy they can seize your returns and garnish your wages, but they didn’t.

    Any help would be amazing. Thank you!!!!!
    I wasn’t paying it because I am the sole bread-winner for my family.

    I work two jobs to support my fiancee (who is disabled) and my two young children.

    Money eventually runs out, and if given the choice to make a student loan payment, or to buy diapers for my son – The choice is obvious.

    I am doing the best that I can.

  6. Shelton May 20, 2014 at 6:04 pm Reply

    I made some mistake in college that are making me miserable. I got credit cards and defaulted, student loans, and defaulted. I had a garnishment on my old job’s wages, and a levy on my bank accounts has me so scared I am operating on cash only. It’s the ONLY thing that’s setting me back I have a new job in NYC that I love and is making more than I made before. But I’m petrified of my wages being garnished again and my account being levied when I get my direct deposit. My savings aren’t huge because the crappy job I had before paid only enough wages to live. I will not being trying to buy a house soon or a car, I am trying to move to NY soon and will need an apartment, but I read that some landlord prefer a bankruptcy than crappy credit (MY SCORE IS 504 :-/) since there will be no judgments/levys to take away my income. I already have my new job and want to stay, should I declare it and start anew or keep lugging on with this debt and crappy credit score?
    I like turkey’s answer but ill leave it open a little longer to get more suggestions..its horrible to live in fear of having your wages garnished or your bank accounts zapped due to past mistakes… like i said my main concern is my apartment, which i wont be able to afford if my accounts are levied and wages i guess i should take this as a rough lesson learned and file before more damage is done..

  7. Manie May 23, 2014 at 1:07 pm Reply

    I love my boyfriend to death… we’ve known each other for years, and have been together for about one year. We have talked marriage and kids, etc.

    The problem is that he is in major financial debt and he keeps spending!! His credit card bills total about $14,000 (nothing to show for it) and his financial aid for college is probably around $30,000 (he’s still in school so he’s not making payment on that).

    He spends his entire paycheck to pay for the minimum amount every month for his credit cards, but continues to put more on it after paying. I know that this way, he’ll NEVER get out (not to mention the interest rates are ridiculous!!)!!!!

    I love him so much and eventually want to marry him, but I don’t want a future of substantial debt. I want a place of our own and some stability… If we do work out, I would want to get married before 2013 (we’re both 23 right now). This is taking a major toll on our relationship… I get so angry when he keeps using his card and ignoring the problem, but then he retaliates saying that his parents can’t afford to help him financially (like mine help me) and that this is how he HAS to pay for things.

    How can I help him change his ways? He goes to school and works part-time; doesn’t make much $. Are there any ways/tips that he can climb out of debt easier if he stops using his cards? He’s even talking about the possibility of joining the Air Force as a way to make $, but I dont know if I can be with someone who’s gone all the time…

    Any financial advice would be really helpful! Thank you!!

  8. Nikia May 27, 2014 at 12:44 pm Reply

    do I really have to pay the enire loan (28k) even if I dropped out of college after just a year? Also, what are my best options.. I cannot afford these payment plans the collection agency offered.

  9. Lavon May 31, 2014 at 5:49 am Reply

    I live in California and had a payday loan with now there treating to call my employer can they really garnish my checks? If yes how do I stop them?

    Thank you

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