Q: How to stop student loan wage garnishment?

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Student loan garnishment for defaulted federal loans allows the Department of Education and its collection agencies to take 15% of your paychecks. The federal government can garnish your wages without a court order using an administrative wage garnishment order.

Private student loans must get a court order before they can garnish your wages or take money out of your bank account. Private lenders cannot garnish your wages simply because you missed student loan payments. They have to sue you first.

CARES Act Suspension. The federal government has paused wage garnishment and other collection activities (offset of Social Security Benefits and tax refunds) for most federal student loans since the coronavirus/COVId-19 pandemic started in March 2020. The government later extended those protections to commercial held FFEL Loans. Those protections will end Sept. 30, 2021, unless Pres. Biden agrees to an extension.

Don't panic if you were facing garnishment before the pause started or if you might face garnishment when it ends. You have options to protect your paycheck from student loan wage garnishment.

How to stop student loan wage garnishment

You can stop a student loan wage garnishment in six ways:

  1. Settlement. A student loan settlement will stop a garnishment before and after it starts. Federal student loan settlements typically eliminate the collection fees and save you 10-15%. Private student loan settlements usually save you 30-70% of the current loan balance. Contact the debt collector handling your loans to find out your settlement options.
  2. Consolidation. Before the wage garnishment starts, you can consolidate the defaulted loans into a Direct Consolidation Loan. After the garnishment starts, most defaulted loans are ineligible for consolidation. In certain instances, borrowers may be able to consolidate Federal Family Education Loans and Federal Perkins Loans even after a garnishment has started.
  3. Loan rehabilitation. The student loan rehabilitation program can stop a wage garnishment before it starts. It can also stop a garnishment after it starts. But you'll need to make five monthly payments on top of the wage garnishment before the garnishment stops.
  4. Bankruptcy. Filing a chapter 7 or chapter 13 bankruptcy stops wage garnishment the day your bankruptcy case is filed. However, bankruptcy does not get your loans out of default. Nor does filing bankruptcy, by itself, allow you to discharge your student loan debt. To get rid of your student loan debt in bankruptcy, you'll need to file a student loan adversary proceeding.
  5. Voluntary Payments. You can stop the garnishment before it starts by entering into a voluntary repayment plan and making your first payment within the prescribed deadline. While the agreement will stop the garnishment, it will not get your federal loans out of default. You'll continue to make monthly payments under that payment plan until your loan balance is paid in full.
  6. Hardship hearing. If the federal student loan garnishment is causing you extreme financial hardship, you can request a hearing to have the garnishment amount reduced or eliminated.

When does a student loan wage garnishment start? Federal student loan wage garnishment starts when the administrative wage garnishment order is sent to your employer. Private lenders can garnish your wages only after they get a court order.

How can I get my student loan out of garnishment?

Most borrowers will get their federal student loans out of garnishment status by either:

  • entering the loan rehabilitation program or
  • applying for a Direct Consolidation Loan

Loan rehabilitation vs. consolidation: The main benefit of choosing the loan rehabilitation program is that you may be able to waive the collection fees added to your loan balance. For the past few years, the US Department of Education has agreed to waive collection fees for the loans it owns (all Direct Loans and some FFEL Program Loans).

The main benefit of consolidation is that it returns your defaulted loans to good standing quickly. The student loan consolidation process typically takes about 2-3 months.

You can start the loan rehabilitation program by contacting the debt collector that has your defaulted loans.

You can consolidate your federal loans for free at the Federal Student Aid website, studentaid.gov.

Student loan garnishment questions

  • Who is garnishing my wages for student loans? If you're being garnished for student loans and you haven't been sued, then you are likely being garnished for federal student loans that are in default. Call the Default Resolution Group (800-621-3115) to find out which private collection agency has your loans. Ask the representative to transfer you to the National Student Loan Data System to ensure you don't have any other federal loans in default. If you're being garnished via a court order, check the garnishment order for the name of the law firm and judgment creditor.
  • Can you stop student loan garnishment after it starts? Federal student loan borrowers can stop a wage garnishment after it starts by entering into the loan rehabilitation program. If you've already completed the rehabilitation program, filing bankruptcy is your only option to stop the garnishment. Private student loan borrowers may be able to stop a wage garnishment by contacting the judgment creditor and asking if they're open to a settlement. If the creditor refuses to settle, your only choice to stop the wage garnishment may be bankruptcy.
  • How long is student loan garnishment? Your paycheck will continue to be garnished for student loans until you get out of default or you pay the loan in full or negotiate a student loan settlement.
  • How much is student loan garnishment? The Department of Education (ED) and guaranty agencies can garnish up to 15% of your disposable income. Your disposable pay is the money remaining from your paycheck after deducting any amounts required by law to be withheld. State law controls the maximum you can be garnished for private loans.
  • Can student loans garnish unemployment? Defaulting on your student loans allows the federal government to do many things, but garnishing your unemployment income or your bank account is not one of them. Your unemployment income is safe from student loan garnishment.

Student Loan Wage Garnishment Financial Hardship

You can object to a proposed garnishment at any time if it would cause you a financial hardship by completing the Department's "Request for Hearing".

The request includes a "Financial Disclosure Statement", which asks for proof of your income and basic living expenses, which may include:

  • lease/mortgage
  • monthly bills for all expenses
  • income tax returns
  • income from your spouse

Although you can submit a hardship objection at any time, if you're under an active wage garnishment, the Department won't process your request until the garnishment has been outstanding for at least six months.

However, in extraordinary circumstances, the Department may provide an earlier hearing if the you can show that your financial circumstances have substantially changed after the notice of proposed garnishment. A substantial change includes a injury, catastrophic illness (e.g., cancer)  or divorce.

Need help stopping a student loan wage garnishment? Let's talk

Ideally, you wouldn't have defaulted on your student loans in the first place. You would've set up affordable repayment terms or gotten a deferment or forbearance. But what's happened has happened already.

Now, the focus is on stopping the garnishment quickly, getting out of student loan default, fixing your credit score, and exploring your repayment options once your student loans are back in good standing with a loan servicer. I've helped hundreds of borrowers like you do the same things.

Schedule a free 10-minute call with me today. We'll go over all of your options to quickly stop the student loan wage garnishment while getting rid of the accrued interest and collection costs.

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