What is Wage Garnishment?
After a Federal student loan has been in default for 270 consecutive days, the government has the ability to collaborate with the Department of Labor to begin the garnishment of wages. Student loan wage garnishment is a way for institutions to collect on Federal loans by acquiring a percentage of the borrower’s paycheck and then directly transferring the amount to the lender.
Garnishment laws allow the Federal government to take up to 15% of the borrower’s wages and/or up to 100% of IRS tax refunds. Some states allow student loan garnishments up to 25% of a borrower’s wages. In addition, no notice to the debtor is required to garnish tax refunds; nor do the lenders need a court order to begin a student loans wage garnishment; levy bank accounts and/or seize property.
The Truth about Federal Student Loan Garnishment
Paying for a college education is not what it used to be. Today’s students who accept student loans are taking on serious financial burdens before they even put their feet through the doors of their first “after-graduation” jobs. In an economy that offers fewer jobs mixed with skyrocketing tuition rates, the average college graduate is literally walking off the graduation ceremony floor and into a dark doom.
For the college graduate who relied on student loans to pay for a large portion of their education, a hefty amount of their after-graduation salary will be required to start the student loan repayment process within six months following graduation. Though a student loan may qualify for a temporary forbearance or deferment, forbearances should be used as a last resort because this option may only be used a few times for a student loan borrower throughout the life of the loan and interest will continue accruing regardless.
Unlike credit cards, personal loans and real estate mortgages, student loans in default cannot be dismissed with a bankruptcy filing. Student loans must be repaid as agreed in the original master promissory terms. If a borrower stops making payments on student loans, the debt will eventually go into default status and the borrower forfeits the federal rights which were originally attached to the loan. Furthermore, when a student loan goes into default status, the negative information will quickly appear on the borrower’s credit report. Lastly, the borrower will no longer be eligible to receive future federal student loans and many would like to return to school to advance or finish an education.
How Can You Stop a Garnishment?
Programs to stop garnishments cater exclusively for student borrowers in these difficult times. If you are currently defaulting on a student loan and concerned about how to avoid wage garnishment, keep in mind that there is a group of professionals offering help for these circumstances. If you are in financial hardship, speak with one of our knowledgeable consultants and our student loan refinance processors will begin work to re-mediate your financial problems.
Student loan garnishment typically causes financial hardship for borrowers and their corresponding families. Borrowers whose wages are being garnished are advised to seek financial help. The Federal government does offer flexible programs to assist student loan borrowers who are in default. However, the defaulted borrower is required to make nine consecutive payments and the process may be overwhelming. It takes time, know-how and structured effort to get payments out of default promptly and correctly.