If you’ve defaulted on your student loans, there are many things that lenders can do legally in order to recover their funds from those who have neglected to make their payments. Wage garnishment is one such path that lenders might choose to take in order to resolve that debt.
As explained by MyEdDebt.Ed.Gov, under the Higher Education Act, lending agencies “may require employers who employ individuals who have defaulted on the repayment of a student loan to deduct 15 percent of the borrower’s disposable pay per period toward repayment of the debt.”
In addition, the decades old Debt Collection Improvement Act permits the deductions to continue until the entire balance of the outstanding debt is paid in full.
Typically these measures are used by lenders and the Department of Education as a last resort to obtain student loan repayments. But there are things you can do to stop student loan garnishment, even if you’ve been previously delinquent on your student loans.
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Avoid Defaulting on Your Student Loans
While it might sound obvious, avoiding default is the simplest way to avoid student loan wage garnishment. Even if you’ve been delinquent in paying your student loans, there are ways you can avoid going into default.
The first, and perhaps most necessary step, is to notify your loan servicer and find out the range of options for a person in your position. From there, you can develop a more sound and realistic financial plan.
Talk to Your Loan Servicer to Arrange a Repayment Plan
Although you may be assigned a repayment plan when you first start paying back your student loans, you can change your repayment plan at any time.
Working with your loan servicer, you may be able to find a plan that makes payments more affordable month-over-month, and give you more time to become financially stable. This can be especially helpful if you’ve recently had a change in financial status, a career change, or experienced a significant life event, such as marriage or divorce.
If you feel that your federal student loans are high in comparison to your income, you might consider requesting a repayment plan that is based on your income.
“Most federal student loans are eligible for at least one income driven repayment plan. If your income is low enough, your payment could be as low as $0 per month,” according to the U.S. Department of Education.
Request Deferment or Forbearance
Deferment and forbearance are similar processes, which if approved, will allow you to temporarily stop or reduce the amount of federal student loans you have to pay each month. The main difference between the two is that with a deferment, students typically are not held responsible for the interest that accrues on certain types of loans during the deferment period. During a forbearance
In order to do so however, certain eligibility requirements must be met.
According to the Department of Education’s guidelines, you may be eligible for a deferment or forbearance if you meet certain qualifications. Those can include active military service, experiencing an economic hardship, or a change in your full-time employment status.
To find out if you’re eligible for deferment or forbearance, you will need to fill out the requisite forms, and or speak to your loan supervisor.
Consolidate Your Student Loan Debt
Loan consolidation might be an attractive option for students who hope to obtain a lower payment amount month-over-month. While many choose income-driven repayment plans, payment amounts could still be too high for borrowers to manage. For some, especially those with lower loan balances, extending the term of the loan might actually yield a lower payment than other repayment options offer.
The main benefit of consolidation, however, is for students to manage their private student loans. Borrowers who consolidate their private student loans can often find a lower (and more manageable) interest rate with more favorable terms, especially if they have been keeping up with their payments.
Consolidation can also be an attractive option if you’ve defaulted on your student loans, as it’s the fastest way to get the loan out of default.
Student Loan Rehabilitation
Student loan rehabilitation is an attractive option for students whose loans have gone into default. Rehabilitation is a process that requires that you make nine payments within a ten-month period. If you meet those terms, your default status will be removed, and your student loan default will be wiped from your credit history, in addition to a number of other benefits.
The loan servicer on your account will likely request 15 percent of your discretionary income, but many are open to recalculating that payment depending on your documented income and your expenses.
Request a Hearing
If you believe that wage garnishment would impose a financial hardship on you or your dependents, it might be possible to request a hearing to challenge a student loan wage garnishment.
Your loan servicer is required to give you a 30-day notice before garnishing your wages. If you request a hearing within 30 days after this Notice of Intent, the garnishment will be put on hold and you can make your case during the hearing.
If you’ve previously defaulted on your student loans, and are worried about your employer potentially garnishing your wages, there are still many options available to you. For help with your individual circumstances, it’s best to speak to your loan servicer, or a financial expert who can better guide you in the right direction.
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