Get Out of Debt Guy

Can I Stop My Garnishment for My Student Loans?

Posted December 26, 2013

Dear Steve,

My wages are being garnished for overdue student loans. Its been going on for a few years. I already declared bankruptcy about 6 years ago but of course that doesn't impact student loans.

I am just wondering if there is any way to move to making voluntary and automatic monthly payments in replace of the garnishment to repay a student loan?

Tiffany

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Dear Tiffany,

I first wanted to address a misperception you and most others have that bankruptcy can't deal with student loans. It can and does when the bankruptcy attorney pursues it correctly. Many people have their student loans reduced or eliminated completely in bankruptcy. for more information.

Much of this depends on what kind of student loans you actually have.

It does not sound like these are private student loans since in North Carolina, a private student loan holder would be able to sue you for default but not garnish your wages.

If they are federal student loans, which I think they are, then your tax refunds can be intercepted and your wages can be garnished through an Administrative Wage Garnishment without suing you.

The federal wage garnishment process for student loans has a very easy appeals process when the garnishment is first issued. An appeal can prevent or significantly reduce the garnishment. 

To avoid garnishment of 15% of disposable pay, the borrower must:

  • Negotiate repayment terms acceptable to the department or the private collection agency (PCA) and ensure that thedepartment receives the first payment by the response deadline date on the garnishment notice, which is 30 days from the date the garnishment notice was sent.
  • Make a hearing request in writing postmarked no later than the deadline on the garnishment notice.
  • If requesting copies of documents, make a request for a hearing because requesting document(s) does not delay a garnishment order.
  • Provide proof to support any objection made to the existence, amount, or enforceability of the debt, or a claim of legal exclusion or financial hardship.
  • Pay any expenses he or she incurs to obtain legal representation and to attend an in-person hearing. (All in-person hearings are held at one of the three regional offices: Atlanta, Chicago, or San Francisco. The borrower is responsible for the cost of attending and those of any witnesses to attend on their behalf.)
  • Initiate any legal action against his or her employer if the employer discharges, refuses to hire, or takes disciplinary action against the borrower based on the garnishment action.

Additionally, federal loans have a process to rehabilitate your student loans. This would stop the garnishment and remove your negative past payment history. Unfortunately at this time it would require you to make nine full payment on top of the garnishment. For many that's impossible. 

Starting in July 2014 the procedure will be modified and the calculation used to make an acceptable rehabilitation payment will change and let more people participate in the rehabilitation program.

Another option is you might be able to still consolidate your student loans now and opt for the income based repayment payment that will be dependent on your income. Your payment could be as low as $0 per month. This can stop a garnishment but you'd need to check to see if your situation would be eligible for this approach. I would suggest you call the U.S. Department of Education Direct Loan Consolidation Center at 1-800-557-7392 and inquire.

Steve

Steve Rhode
WRAL Get Out of Debt Guy

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2 Comments

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  • 68_dodge_polara Dec 30, 2013

    Some additional information about usastudentdebtrelief

    http://www.usnews.com/news/articles/2013/06/25/student-debt-relief-companies-profit-from-borrower-confusion-report-says

  • Danny22 Dec 27, 2013

    As a taxpayer, who paid off my loans a long time ago, I'm wondering how you plan to pay the taxpayer back. I worked 2 jobs. Maybe you have something you could sell or trade in your car for a cheaper one. I ate a lot of ramen noodles and vacationed at my parents' home, bought no new clothes, etc. You can do it. Set up a plan and be willing to sacrifice. You will be proud of yourself.

About this Blog:

Steve Rhode has had careers in opthalmology, real estate and as the head of a nonprofit debt counseling firm. On his blog, he offers hard-won, free advice about getting out of debt, consolidation and making the right choices as you manage your money.