Have you received a letter telling you that you’ve defaulted on your student loans and the government is threatening to garnish your wages? Is your employer already garnishing your wages?
Unlike a private creditor, when it comes to student loans, the government doesn’t have to sue you first to obtain a judgment and then garnish your wages. This is because the government can use something called “administrative wage garnishment” to seize a portion of your wages.
The Department of Education contracts with a number of collection agencies to act on its behalf to recover payment of defaulted federal student loans. When you are in default (“default” for most federal student loans is failing to make a payment for 270 days), the loan servicer contacts your employer to determine how much you are making and then begins calculating the amount to be garnished.
Under a wage garnishment order, no more than 15% of your disposable pay may be deducted to collect delinquent student loan repayments, unless you give written consent for a greater deduction. That being said, if you make less than 30 times the minimum wage, your wages cannot be touched. That means, as of the date of this article, if you make $217.50 (30 x $7.25 (the Federal Minimum Wage)) or less, you are protected from garnishment. If you earn between $217.50 and $252.94, the amount over $217.50 may be withheld, and where you earn more than $252.94 in disposable income, 15% of that amount may be withheld for your student loan garnishment.
Before all this can happen, the loan servicer is required to give you 30 days notice that an administrative wage garnishment is going to take place. This notice tells you about your various rights, but two of the most important are the ability to: (1) enter into a repayment plan, and/or (2) request a hearing to present evidence against a potential garnishment. Requesting a hearing within 30 days (15 days for Federal Family Education Loans) puts the garnishment on hold until the proceedings are complete.
The most common reason to request a hearing and challenge garnishment is that the 15% being taken will cause you excessive financial hardship to you or any dependents. You can submit a hardship form prior to the hearing.
Other potential challenges to raise include, but are not limited to:
- The loan was already paid or forgiven,
- You already have a repayment agreement,
- Your school did not pay you a refund you were owed,
- The initial borrower is deceased or permanently disabled, and/or
- You qualify for loan forgiveness, loan cancellation, or a discharge of your loan.
- You were terminated by your prior employer and only held your current job for less than 12 months,
These hearings are usually conducted over the phone unless you request an in-person hearing in San Francisco, Chicago, or Atlanta. If you request such a hearing, you are responsible for any costs incurred.
Note: Even after an administrative wage garnishment begins, you can still contact the loan servicer to set up a payment plan.
If you want more information about your options for resolving your defaulted student loans, don’t hesitate to contact Graham & Borgese today. We can evaluate your situation and help you navigate the process that makes the most sense for you and your family.