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How to Stop Garnishment on Student Loans

There are different way to stop a student loan garnishment, depending on the type of student loan you have.

Updated: Mar 12, 2014

Highlights

  • Contact the Dept. of Education to prevent wage garnishment.
  • Consider filing a Chapter 13, which results in a court supervised repayment plan.
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State and Federal Laws May Help You Stop a Student Loan Wage Garnishment.

The options available to stop or reduce a student loan-related wage garnishment depend on what kind of loan and where you live. The rules are different for federal student loans, such as Perkins, Stafford,  and PLUS loans, and for private student loans. 

Federal Student Loan Garnishment

Federal law allows the Department of Education to garnish 15% of a delinquent borrower’s after tax income for federally insured student loans (34 C.F.R. Part 34-Administrative Wage Garnishment). It may do so as long as the garnishment does not bring the borrower’s weekly pay below 30 times the Federal minimum wage. Currently, you are guaranteed that $217.50 ($7.25/hour × 30 hours) per week is exempt from garnishment. (These numbers are current as of early 2014.)

If you make less than that amount each week, then your wages are exempt from garnishment altogether. 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 (31 USC Chapter 37, Subchapter II). Federal agencies may intercept your tax refund, which is called “offset” (26 U.S.C. § 6402(d) and 31 U.S.C. § 3720A). You also can have your income tax refund taken to pay down your student loan debt.

Keep in mind that no matter where you live, if your loans are federally insured, you can usually be garnished 15% of your disposable wages, regardless of your state laws regarding garnishment for other types of debts.

If you can prove to the Dept. of Education that its garnishment of your wages is causing your family an undue financial hardship, it may be willing to stop the garnishment and work with you in establishing alternate repayment terms. For example, facing foreclosure of your home as a result of garnishment should qualify as an undue hardship.

To try to stop an administrative garnishment, contact the Department of Education’s resource Facing Loan Default. The DOE provides a list of resources available for consumers who have defaulted on their loans. Another good resource to explore is the Student Loan Borrower Assistance Project’s (SLBAP) Administrative Wage Garnishments.

If your federal student loan payments are causing financial distress, review the Income-Based Repayment (IBR) program, and see the Dept. of Education’s IBR calculator. If you do not qualify for IBR, learn if Income Contingent Repayment is right for you.

If you defaulted on your federal loans and want to restart payments, see the Dept. of Education’s Loan Rehabilitation page.

Check the Dept. of Education’s National Student Loan Data System (NSLDS) to see if the loan is federal. State statutes of limitations do not apply to federal loans, and are subject to collection indefinitely. Student loans not backed by federal grants or guarantees do not appear in the NSLDS, and are therefore private. Private student loans are subject to state statutes of limitations for breach of contract.

Private Student Loan Garnishment

Private student loans, on the other hand, are basically the same as any other unsecured personal loan; the only major difference between private student loans and regular personal loans is that the former are generally non-dischargeable in bankruptcy.

Quick Tip

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Private lenders must file a lawsuit against the borrower and obtain a judgment before they can garnish wages, so it takes private lenders longer to begin a garnishment. A judgment will appear in the "Public Records" area of your credit report.

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Depending on where you live, private lenders with a judgment may garnish as much as 25% of the your after-tax wages (15 U.S.C. 1673). However, the amount that can be garnished is specific to each state. See the Bills.com resource Collection Laws & Exemptions by State to determine how much of your pay can be garnished by private lenders. Texas and Pennsylvania, for example, do not allow wage garnishment for unsecured debts such as private student loans.

To try to stop a garnishment resulting from a private loan, you should contact the creditor to discuss your financial situation and try to negotiate an alternate payment plan. Unfortunately, the creditor may not be willing to stop the garnishment voluntarily, forcing you to explore alternative options.

Quick Tip

Some debt settlement companies are now accepting private student loan debt. Get a free consultation with a Bills.com pre-screened debt relief provider, if you are struggling to pay your private student loans.

Bankruptcy and Student loans

The last option most people consider to prevent garnishment for student loans is filing for bankruptcy protection. since student loans generally cannot be discharged 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 to the court.

Chapter 13 can be an expensive and long-term commitment (5 years, typically), but if you feel it may be an option to stop your wage garnishment, consult with a bankruptcy attorney in your area to learn if bankruptcy will help improve your financial outlook. Surprisingly, some find 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.

Filing a chapter 13 bankruptcy may bring your mortgage current, stop a foreclosure, and allow you to pay now-delinquent payments over the course of your bankruptcy plan. To learn more about your bankruptcy options, visit the Bills.com bankruptcy information & resources page.

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  • TW
    Jun, 2014
    thea
    They are currently garnishing 15% of my income for a defaulted federal student debt. The 950 a month completely killing me. I have submitted all the required documents to the Collection Agency and they said that they would be sending all of those over to the Department of Education. They said that if after 60 day of when I initially filed the request for hearing, if they still do not have a hearing date or a final judgment, they will hold the garnishment. The 60 day time period will be here in about a week. The woman that I worked with through the collection agency asked me to follow up with her a week after she submitted the package, but I haven't heard anything. So my question, in people's experiences, how successful were they in getting a wage garnishment reduction. With them garnishing my paycheck, I can barely buy groceries and put gas into my car in order to get to work. I am a single mom of two kids and one of my kids are in college. When I sent them my final financials I basically I have an extra $150 after all of my bills have been paid and this was before the garnishment. I just want to know what the chances are for them reducing my garnishment and by how much.
    0 Votes

  • FG
    Apr, 2014
    Faith
    My employer incorrectly garnished my wages at 25% instead of 15%. Can I get that money back. It stated in the paperwork in 3 places not to exceed 15%.
    0 Votes

    • BA
      Apr, 2014
      Bill
      Have a heart-to-heart conversation with your payroll person. If he or she refuses to correct the error, then you have two choices: Live with the error, or hire a lawyer to send your payroll person a letter explaining the law.
      0 Votes

    • SM
      May, 2014
      Sean
      With a loan consolidation, you could have your wage garnishment removed completely. There are services available that will allow you to create a repayment plan that is based on your current income. If you have not already consolidated your student loans, then this would be a good option for you.
      0 Votes

  • SB
    Apr, 2014
    Sasha
    I objected and submitted paper work to end my student loan garnishment. They reduced my garnishment only $25. Is there any way to object again? Will nothing stop the garnishment? This is a nightmare, however it is my fault for allowing this to happen.
    0 Votes

    • BA
      Apr, 2014
      Bill
      Is the loan private or federal? What is your reason for objecting to the wage garnishment? Is the loan not yours? Is the balance due incorrect? Is the loan paid? Is the amount garnished unreasonable? If the loan is federal, you can request a hearing with the Dept. of Education to discuss the garnishment amount.
      0 Votes

  • JM
    Mar, 2014
    Jon
    I just completed my 9 month rehab program for my defaulted student loans in Feb and now my student loan has been transferred to Fed Loan. I just received a letter from Dept of Treasury that my tax refund for this year is being forwarded to the DOE to pay down my student loan balance. I thought the Offset is removed after completing the rehab program. Any ideas if I can contest the tax return intercept? I was informed last year when enrolling into the program that this tax intercept would not happen after completing the program.
    0 Votes

    • BA
      Mar, 2014
      Bill
      Try contacting the IRS Officer of the Taxpayer Advocate at 877-777-4778. See if providing the IRS the date that your loan moved out of default will allow you to receive your tax refund.
      0 Votes

  • SH
    Mar, 2014
    sergio
    I was employed last year and my job required me to drive. Due to some traffic fines I couldn't pay, my license was suspended which caused my employment to be terminated. I am having trouble finding employment because of my inability to drive or pay my fines that amount over 3,000 dollars. This year I was expecting a 6,000 dollar return and Department of Education offset my return. I am a single father of 2 children and am living with my mother until I get back on my feet. She is struggling to keep up with her mortgage, utilities, and car payment herself. I feel helpless. 10,000 dollars in student loans and i have nothing to show for it. I never pursued my degree because i fell behind on my payments and was discharged from the online college I was attending. I've become ill with anxiety and stress and also depression disorders. I don't know what else to do. I was relying on that money, my family was relying on that money.
    0 Votes

    • BA
      Mar, 2014
      Bill
      Consult with a lawyer in your state who has consumer law experience or bankruptcy experience. Learn if a chapter 13 might help you get your finances in order.
      0 Votes

    • SM
      May, 2014
      Sean
      It appears that you are a victim of wage garnishment. If the department of education does not receive your payments in a timely matter, then they have the option to garnish your wages, your tax returns, and they can revoke your professional license (if you have one). You would need to contact a lawyer or a Student Loan relief center that offers Wage Garnishment Relief. They could help with putting a stop to your garnishments and get you a lower, more affordable rate on your student loans.
      0 Votes