Navient can garnish your wages for private student loans you defaulted on, but only after they file a lawsuit and get a judgment. For federal student loans, Navient typically won't be the entity sending a wage garnishment order to your work. That will almost always be either the federal government or a private collection agency.
What happens if I don't pay Navient?
Generally, if you miss your monthly payments and aren't in a deferment or forbearance, Navient will report the missed payments to the credit bureau. The late payments will cause your credit score to drop and will remain on your credit report for 7 years.
Click here to read Will FedLoan Remove Late Payments From my Credit Report?
You don't have to worry about wage garnishment or having your tax refund or Social Security benefits are taken to pay back your student loan debt until after your default. But even then, that only happens for federal student loan default. Private student loans can't garnish your wages until they sue you and get a judgment.
How long does it take them to sue? They usually don't sue right away. More commonly, they sue a few years after your last payment.
Those are the everyday things that happen when you don't pay Navient regardless if the loan is federal or private.
Here's a breakdown of what happens, depending on the loan type.
Federal student loans. When you don't pay federal student loans Navient is the loan servicer for, after you default, Navient will send the debt either to a collection agency or to the U.S. Department of Education.
Which one it sends the loans to depends on the type of loan it is.
Click here to learn more about Navient Student Loan Forgiveness Options
If it's a Federal Family Education Loan, the loan may be owned by a guarantor agency.
If so, then the loan will go to a collection agency. But if it's a Direct Loan or FFEL Loan owned by the Department of Education, it will be sent to the Department. From there, the Department will send the defaulted loan to the Default Resolution Group.
Private student loans. When you fail to make your student loan payments for private loans Navient owns, here's what generally happens.
First, Navient will send your loan to an internal collections unit. A few months later, if that unit is unable to collect, then the loan will be sent to another unit. And if that unit can't collect, then the loan will end up with the recovery unit.
Once your loan is with the recovery unit, you'll typically be asked to set up monthly payments to keep the debt from going into collections. You may even be offered a student loan settlement.
When can student loans garnish wages?
Federal loans can garnish your wages after you default. You default on a federal student loan after you miss 9 monthly payments. Typically, they'll start garnishing your wages a few months after you default. Before that happens, however, you should get notice of the proposed wage garnishment. That notice will give you 30 days to set up a repayment agreement, or else the garnishment will start.
Federal loans don't need a court order to garnish your wages. They can do so using an administrative wage garnishment.
Private loans, on the other hand, have to have a court order before they can start garnishing. Because of that, that means you first have to be sued by the loan lender/loan holder. Typically, this will happen close to the time the statute of limitations is close to running out.
How much can student loans garnish from wages?
Most federal student loan borrowers who are garnished for student loans will lose about 15% of their disposable pay. But some student loan borrowers who are in default on several federal loans may have up to 25% of their disposable income garnished.
I say up to because you can apply for financial hardship to have the garnishment either stopped or lowered.
Private loans can garnish whatever percentage your state allows them to garnish.
How to stop wage garnishment?
You can stop wage garnishment for federal loans before it starts by:
- applying for loan consolidation
- entering into a loan rehabilitation agreement
- entering into a voluntary repayment plan (this won't bring your student debt back into good standing) or
- negotiating a settlement for ~85% of the loan balance.
After it starts, loan consolidation is no longer an option. And entering into a repayment plan won't stop it either. Your only option is loan rehabilitation. But if that isn't an option because you've twice defaulted on the same loan, bankruptcy may be your only option to stop the garnishment.
With private student loans, the only way to stop it without filing bankruptcy is to try and negotiate an alternative repayment plan with the judgment holder.
Currently, due to the coronavirus pandemic, the federal government passed the CARES Act.
Under that federal law, the government has suspended wage garnishment for the loans it owns. It has also stopped the interest rate from accruing and has agreed to make the monthly payments for student loan borrowers in the loan rehabilitation program. Those benefits will last until September 30, 2020. After that, expect the debt collectors to start right back, garnishing your wages if you haven't set up some other repayment option.