Making your government-backed student loan payment can feel overwhelming but ignoring it comes with undesirable consequences. If nonpayment continues, the U.S. Department of Education (or the loan servicer) will place the account in a default status, and, once in default, the servicer can require your employer to withhold 15% of your disposable earnings (the amount remaining after subtracting mandatory deductions). Even so, you aren’t permanently stuck with the wage garnishment. In this article, you’ll learn about ways to bring it to a stop.
How the Garnishment Starts
If you allow more than 270 days to elapse without making a payment, your student loan will go into a default status, thereby triggering the following:
- The entire amount will become due and payable.
- You’ll lose the right to take advantage of helpful payment plans.
- Your loan will be placed in collections.
- If you’re employed, the servicer will likely garnish your wages.
The servicer must send you notice of the garnishment 30 days before it begins, so a garnishment shouldn’t take you by surprise. The letter will include an explanation of the following:
- the balance owed
- how to enter into a repayment plan voluntarily, and
- how to request a hearing if you’re not responsible for the debt.
It’s a good idea to attempt to work out an arrangement with your loan servicer before the garnishment is in place. If, however, money is already being taken from your check, rest assured that with a little effort, it’s possible to get it stopped.
Bringing the Loan Out of Default
Before you can stop the garnishment, you must get the loan out of the negative status. In other words, it must no longer be in default. There are three ways to make this happen:
- Pay the loan in full.
- Consolidate your loans.
- Enter into a rehabilitation plan and make nine payments successfully.
Be aware that choosing the rehabilitation option can be expensive. Why? The garnishment will remain in place while you’re paying the monthly rehabilitation amount. In effect, you’ll be making two separate payments for nine months. To determine what’s best for you, consider discussing the options with your servicer.
Consulting With a Bankruptcy Attorney
Student loan debt rarely goes away in bankruptcy. Before it will you must prove that there’s no reason to believe that you’ll ever have the earning capacity to repay it—and that’s a pretty hard standard to meet.
That doesn’t mean that bankruptcy is entirely out of the question. For instance, you might find relief in a Chapter 13 bankruptcy. Not only will it stop the garnishment, but you’ll likely be able to drastically reduce the amount that you pay toward your student loan while paying off other debt. The benefit is that at the end of your plan, more income should be freed up to pay your student loan.
If you’re considering moving your student loan into an income-dependent repayment program (a portion of your student loan balance gets forgiven after the passage of time), or if it is already in one, keep in mind that the time spent in bankruptcy probably won’t be included in the repayment period. Before pursuing this option, you should speak with an attorney familiar with how bankruptcy affects student loan repayment programs.
(For more on this subject, see Can Chapter 13 Bankruptcy Help Me Lower my Student Loan Payment?)
Questions for Your Attorney
- If I want to dispute the student loan debt, can you represent me at a hearing?
- What will happen if another creditor attempts to garnish my wages—does the state limit the total amount garnished?
- Given my total debt, does filing for Chapter 13 bankruptcy make sense in my case?