3 Facts Everyone Should Know About Student Loan Garnishment

Student loan debt is currently one of the biggest financial problems in the United States, and one of the most common types of debt that borrowers default on. You are in default if you fail to make payments on your federal student loan for over 270 days, or 120 days on a private loan, and have failed to be awarded a forbearance, deferment, or other formal solution with your borrower. Inevitably, legal action will be taken against you by the lender to recoup losses. Before you find yourself in a mire of legal proceedings, check out these basics about wage garnishment and student loan debt.

1. What They Can Take

Borrowers in default who have been laid off or fired from employment are exempt from student loan garnishment until they’ve been employed for a minimum of 12 consecutive months, thanks to the Higher Education Act. However, there many other ways that federal lenders can go after defaulted loans:

• Garnish up to 15 percent of disposable income
• Intercept federal and state income tax returns
• Withholding of Social Security benefits
• Loss of eligibility for deferment, forbearance, and other types of repayment plans

With federal student loans, a court order isn’t even necessary. If the federal government finds that you’ve defaulted on a loan, they can order your employer to begin wage garnishment.

2. Private Versus Federal Loans

The major difference between how wage garnishment happens between federal and private student loans is the mechanism by which action is brought against you. For federal student loans, the U.S. government may garnish your wages without a court ruling. On the other hand, in order for a private lender to garnish your wages, they’ll need to sue you and be awarded a court ruling. The creditor is required to send a 30 day notice letter to your last known address before trying to garnish your wages.

3. How to Stop Wage Garnishment

The short answer is that you should double check all your facts and figures, and then go to court. First, you’ll need to request a hearing to challenge the garnishment. One of the most common claims is financial hardship, which is based on the size of your family, your income, and expenses. There are a number of other factors once you get to this point that can a big impact on whether or not your request is granted, such as employment status, qualifying for forgiveness or cancellation of the student loan, or making payments under a different agreement. There are many ways in which you might find you’re eligible for some reprieve even after your wages have started being garnished.

If you’re facing wage garnishment over defaulted student loans, you’re not alone. Statistically, one in 10 working Americans aged 35 to 44 are having wages garnished over outstanding debt, including student loans. In order to effectively maneuver your way through the legalese and finer parts of the law, contact an attorney. Having a guide who knows the ins and outs of student loan garnishment laws can be well worth it in the long run and help you make informed, savvy decisions about your financial situation.