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PayOff Student Loans
Question: I have several student loans for over $50,000 that are behind since I have not had a job for 7 months. Now that I want to work with the student loan people said that they are gonna garnish my wages! What could I doo to stop them and pay off my student loans?
Answer: While student loans can be a great resource for students trying to finance aneducation, they can also be a serious financial burden for those graduates who find themselves unable to afford the payments on their loans.
1. Consolidate Student Loans
My first advice is to try to consolidate your student loans and lower your payments. This could let you get back on track, and then when you have accumulated additional funds you can go ahead and pay off your student loans. If you want to compare rates and terms to consolidate your student loans, you can get matched with several pre-approved lenders, by applying here:
Student Loan Consolidation Savings Quote
2. Try to Resolve Your Student Loans
The options available to you to help you resolve your delinquent student loans will depend primarily on whether the loans you borrowed were federally insured loans, such as Stafford loans or Plus loans, or if they were private student loans. While most federal student loan programs offer significant financial assistance to borrowers facing financial difficulties, private student loans frequently offer fewer options for borrowers unable to meet their monthly payments. Regardless of the type of loans you have, you should be able to find assistance in repaying these obligations.
3. Hardship Deferment for Student Loans
Next, I encourage you to contact your lenders to find out if your outstanding student loans are federally guaranteed or private loans. You may find that you have a mix of these two types. Most federal loan programs allow for deferment of payments for borrowers struggling to make their payments, as long as the borrower meets certain requirements, such as having a documented financial hardship. This type of loan deferral is called a “hardship deferment.” You should contact your lenders to discuss whether or not your loans qualify for a hardship deferral. If you have a mix of federally insured and private loans, you may find that some of your loans qualify for deferral while others do not. Even a few of your loans being placed on deferment could free up money each month, allowing you to bring your other delinquent loans current. Again, you need to contact your lenders to find out if a deferment program is available on your loans.
4. Negotiate Repayment and Pay off
On Student Loans - Avoid Garnishment
If you are unable to defer your loans, the next step is to negotiate a repayment plan with the lenders. Since you are going back to work, and do not wish to have your wages garnished, your lenders may be able to offer you a repayment plan that fits within your budget. Again, contact the lenders to discuss repayment options. If you are unable to afford the payments demanded by the lenders, they could proceed to garnish your wages. For federally insured loans, the Department of Education can garnish 15% of your after tax income, as long as the garnishment does not bring your weekly pay below 30 times the Federal minimum wage. Currently, this means you are guaranteed at least $154.40 per week exempt from garnishment. If you make less than that amount, then your wages are exempt from garnishment altogether. The Department of Education or guaranty agency is not required to obtain a judgment against you before garnishing your wages, so garnishment can happen quickly on federally insured loans.
Private lenders, on the other hand, must file a lawsuit against you and obtain a judgment before they can garnish your wages, so it takes private lenders longer to begin a garnishment. Depending on where you live, private lenders with a judgment against you could garnish as much as 25% of your after-tax wages. However, the amount that can be garnished is specific to your state, so you need to look into your state laws on garnishment to determine the risk of garnishment by private lenders. Texas and Pennsylvania, for example, do not allow wage garnishment for unsecured debts such as private student loans. Keep in mind that no matter where you live, if your loans are federally insured, then you can usually be garnished 15% of your disposable wages, regardless of your state laws regarding garnishment.
If, after starting your new job, you are able to bring your loans current though monthly payments, you may be eligible for a student loan consolidation program. Generally, these programs are designed to consolidate several federally insured student loans into a single loan, frequently at a lower interest rate and with lower monthly payments. When you contact your lenders about deferment and repayment plans, I encourage you to also ask about consolidation loans. I do not think you will
be eligible now, since your loans are in default; however, your lenders should be able to tell if consolidation would be possible once your loans are brought current. If you want to compare rates and terms to consolidate your student loans, you can get matched with several pre-approved lenders, by applying here: https://www.bills.com/studentloan/loan/
Finally, the last way to prevent garnishment for student loans is by filing for bankruptcy protection. Since student loans generally cannot be included in a Chapter 7 filing, you would probably need to file a Chapter 13 bankruptcy, which is a court supervised repayment plan in which your student loans, as well as other debts, would be repaid through monthly payments made by you to the court. Chapter 13 can be an expensive and long-term commitment (5 years, typically), but if you feel that it may be your only option to prevent a wage garnishment, you should contact a bankruptcy attorney in your area to find out if bankruptcy will help improve your financial outlook. Surprisingly, many people find that their monthly payments under a Chapter 13 are more than the amount they would have been garnished had they done nothing, so if you are considering bankruptcy, please make sure to discuss it in detail with an attorney to determine if it is the right choice for you. To learn more about bankruptcy, I encourage you to visit the Bills.com Bankruptcy Information and Resources page, available at http://www.bills.com/bankruptcy/
I wish you the best of luck in resolving your student loan debt. To read more about student loans, and the options available to consumers struggling to repay them, I invite you to visit the Bills.com Student Loan Information page at http://www.bills.com/student-loans/
While I believe that you should be able to resolve your student loan troubles by working with your lenders, keep in mind that other options are available if needed. You should explore all of your options to determine which solution works best for you and your financial situation. I hope that the information I have provided helps you Find. Learn. Save.
Best,
Bill
www.bills.com
Also, make sure to get a free financial health check-up with Bills IQ!
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1. Posted by carmel on Wednesday 1st August 2007 20:58
I AM BEHIND IN MY STUDENT LOANS AND I DONT HAVE ANY MORE FORBERES OR HARDSHIP AND WHAT CAN I DO SO THAT THE STUDENT LOAN PEOPLE WANT GARNISED MY WAGE .
2. Posted by Darrell on Saturday 6th October 2007 19:50
Question: I am a recent college graduate. Currently at the age of 24,I have about 109,000 in debt in Sallie Mae private loans. My current payment is $1323 a month which i can not afford. With the cost of living and being a parent as well. I only make 34,000 a year. What advise or tips can you give me on trying to consolidate my loan.
3. Posted by Nate on Monday 8th October 2007 10:54
You can consolidate private student loans, but it is a little more challenging, a slightly longer application process, and the process is subject to traditional underwriting. First off, I would recommend applying here and getting a free consultation to see if you can save: https://www.bills.com/studentloan/loan/ I can also advise you of two companies that offer private student loan consolidation: ConsolidatePLUS ( http://www.consolidateplus.com ) Freedom Student Loans ( http://www.freedomstudentloans.com ) If you contact a firm, a student loan advisor will consult with you to solve your problems and see how low your payment can be. You can consolidate private student loans, but typically the underwriting decision is based on credit (including your credit score and your debt to income ratio). If you have impeccable credit, it is reasonable to expect to pay somewhere in the neighborhood of LIBOR (London Interbank Rate) plus 5.0% (approximately 10.5%). If you have terrible credit you might not get approved, but if you do get approved you'll probably be paying around LIBOR plus 5.75% and you will likely have to pay some origination fees (that typically get added to the loan balance). The good news is that with most private student loan consolidations, you should be able to cut the monthly payment substantially. To learn more about student loans, I encourage your to visit the Bills.com Student Loans Information page at http://www.bills.com/student-loans Best, Bill www.bills.com
4. Posted by Deedie on Wednesday 24th October 2007 09:43
I borrowed $39,000 for my education including my Masters degree. My payback is now $130,000.00. I am a high school teacher. I don't have that kind of money. What can I do to dissolve most of this interest?
5. Posted by ethan on Wednesday 24th October 2007 15:17
Well, unfortunately you are in all too common of a situation. First of all -- it's really unlikely that you can file bankruptcy (most student loans are not dischargeable in a chapter 7). You can try to get a very low monthly payment, thru student loan consolidation (i'll bet you have a private and federal student loans with that much... so go to a provider that does both). Bills.com can hook you up with a free consultation here: https://www.bills.com/studentloan/loan With the new student loan legislation, you might qualify to have your debts 'extinguised' after 10 years of payment... but you should investigate this feature. Good luck.
6. Posted by Kim A on Thursday 29th November 2007 17:46
Is there a way to reverse a garnishment on student loans. A collection agancy started garnishing my wages without even notifying me. There was some kind of mistake made on my account and noone can figure it out. All my other student loans are on a forbearance. For some reason, this one went into default. Noone can tell me why. The collection agency said there is nothing I can do at this point, but let the take out the money and pay off the loan. I have three children and they are taking out$500 a month. I receive no child support either.
7. Posted by Ethan on Monday 3rd December 2007 06:30
Wage garnishments are a frequent result of borrowers defaulting on their student loans. Many student loans are federally insured, so in cases of default they become debts owed to the federal government. Unlike other creditors, the federal government has the right to garnish wages, levy bank accounts, and seize property without first obtaining a court judgment against the debtor. Unfortunately, this lack of court review can result in inappropriate and unjustified enforcement action, as may have happened in your case. The only possible way to stop this garnishment is for you to contact the Department of Education to discuss the error that was made and find out if the DOE will stop the wage garnishment due to the fact that you were entitled to forbearance at the time the loan defaulted. I admit that you are likely facing an uphill battle in this situation–as with all bureaucracies, the DOE can be difficult to negotiate with when attempting to resolve errors as the one that apparently occurred in your case. Even if the DOE will not stop the garnishment, it may be willing to reduce the amount if you can demonstrate that the garnishment is causing you and your family an undue hardship. If you find that the DOE will not work with you in stopping or reducing the garnishment, you may want to hire an attorney to assist you in communicating with the DOE and the collection agency, as an attorney’s knowledge and experience in dealing with student loan collections may work in your favor. To learn more about student loans and what happens when they go into default, I encourage you to visit the Department of Education’s Student Aid website at http://www.ed.gov/offices/OSFAP/DCS/default.html.
8. Posted by Tamara on Tuesday 1st January 2008 22:14
I recently received a notice of wage garnishment for a federal student loan but I have no job and no income. I also have a 2 year old child to support. What can they do if I cannot pay through garnishment or monthly payments?
9. Posted by Nithin on Wednesday 2nd January 2008 10:41
If you can afford an attorney, you should hire one to represent you. You may object that garnishment in the amount or rate stated in the Notice of Intent to Garnish would create an undue financial hardship for you and your family. You will have to send a wriiten request to do so. I suggest you read more about your rights ans responsibilities at the Department of Education’s Student Aid website at http://www.ed.gov/offices/OSFAP/DCS/default.html. The website provides indepth information and would be a good starting point.
10. Posted by Marsan on Monday 5th May 2008 13:16
I have a defaulted student loan with a collection agency. I have paid twice the amount of the original loan already and still owe 3 times the original amount plus interest and penalties. Is there any relief out there? The collection agency's payoff amount is not much less that the entire amount due. Any legal avenues???
11. Posted by Bill on Monday 5th May 2008 14:26
There are very limited options when it comes to student loans, especially ones in default. One option that might still be workable is rehabilitation. To rehabilitate a loan, you need to make nine to 12 consecutive, on-time monthly payments. The loan is then sold to a new lender, and the default gets wiped off your credit record. A lender buys back a defaulted loan so it's like it never happened. Speak to your collection agency to see if this option is workable.
12. Posted by Sharon on Wednesday 25th June 2008 11:04
I recieved a call from a student loan collection agency and they told me that if I don't pay a certain amount they are going to garnush my wages. She also stated that the company has already recieved approval to garnish my wages. I explained that the amount they are asking is too much for me right now. However, I can pay within a certain time frame. She told me should couldn't hold my account that long and she was going to sign off on the garnishment. How long to I have until they actually start taking money from my check?
13. Posted by Bill on Wednesday 25th June 2008 15:49
Sharon, no collection agency can garnish your wages with out a court ordered judgment. Did you happen to receive a court summons in the past? If you did receive one and did not respond to it, then there is a chance that a default judgment might have been passed against you, but if you do not recall any such notice then I suspect that it is only a scare tactic. I would talk to agent about a payment plan depending on how much you could afford to pay every month.