Unlike credit cards and other traditional consumer loans, college loan debt cannot be absolved with a bankruptcy. If an individual owes money on their student loans, they must make every attempt to pay the debt. Otherwise, the default borrower may be subject to Administrative Wage Garnishment.
Wage garnishment is a term which simply means that a borrower’s wages can be taken from their paycheck in order to satisfy a delinquent debt. Private and federal lenders for student loans are not required to obtain a court order prior to garnishing wages.
If you have multiple student loans in default, the lenders may be able to take up to 15% of your disposable income. In some states, lenders are entitled to garnish as much 25% of a borrower’s disposable income. Nonetheless, borrowers with loans in default do have certain rights under wage garnishment laws including the ability to:
- Request a court hearing;
- Receive a copy of all records pertaining to your debt;
- Set up a repayment plan (this cannot be done if an Order of Withholding from Earnings has already been issued).
Your employer cannot legally discipline or fire you because of garnished wages. It is also unlawful for a potential employer to refuse employment to someone whose wages are being garnished. A borrower with a default student loan is to be notified in writing at least 30 days before a garnishment begins. This letter should describe the debt and provide an explanation of your garnishment rights.
The notification of garnishment will provide the borrower with a specific date when the garnishment(s) will begin. If the debtor is able to repay the loan or establish repayment arrangements with the lender prior to the garnishment effective date, the garnishment(s) may be avoided. If the borrower does not respond to the notification, wage garnishment proceedings will continue in effect until the debt is paid in full. Some borrowers may be able to stop a wage garnishment by refinancing their loans.
There are other serious consequences for delinquent student loans, such as:
- Inability to collect state lottery winnings;
- Garnishments of federal and/or state tax refunds owed you;
- Unpaid student loan debt will affect the default borrower’s credit report more negatively than any other unpaid debt;
- The debt will never be satisfied (regardless if the debt is removed from credit report).
If you have defaulted on student loans and are concerned about how to stop wage garnishment or prevent a potential garnishment, our knowledgeable student loan refinance consultants are standing by to help. Canty & Associates is experienced at getting student loans out of default and provide FREE consultations for student loan borrowers Nationwide. We are available to answer your questions and concerns during business hours Monday through Friday 9:00am until 5:30pm (EST). Call us toll free at 866-203-5312, or submit your request right here online.