An Overview Of Student Loan Garnishment & Alternatives

February 6, 2012

Student Loan Garnishment

Student Loan Garnishment

Student loan garnishment, also known as administrative wage garnishment, is essentially the result of not paying at least your minimum monthly payment to your student loan lender, which is where your student loan is in default. What happens is if you stop making your payments for a certain amount that is usually around 270 days, the government or a third party collector pretty much now has a say over what you earn in the form of taking your enough money out of your employment check every month to cover the expenses that you owe. Student loan garnishment occurs on top of being charged with late fees as well as affects your credit significantly. Garnishment which is like collection, can also be done on all your past due student loan payments, which a certain amount is taken out each month. Depending on what source you obtained your loan from, the goverment will either garnish your wages for federal student loan debt, or a private lender or collector will seek to garnish your student loan debt for private loans coming from sources like banks and credit unions among other sources.

The way this all works is that the collector contacts your employer and asks them to withold a certain amount of earnings to satisfy the debt that you owe. Now this process is all started after multiple contact attempts between the collector and the individual in debt, which the person in debt neglects to provide feedback on their situation and continues to miss their monthly student loan repayment. When the employer is contacted, they cannot refuse the garnishment proposal from which point they will deduct a certain amount per month to go towards paying back the collector until the garnished dues are fully paid off. These amounts are usually based off of percenatages that include; 25 percent for private student loan garnishment as well as 15 percent for federal student loan garnishment.

Although this act can appear negative, it will not affect someones job status as it is illegal to fire someone due to student loan garnishment where reprocussions of the act can include both prison time and a fine as high as $1000.

Student Loan Garnishment Alternatives

Being that wage garnishment can be taken from not only paychecks but also income tax returns and even social security income, below are methods that you can use before it gets to late, which will enable you to get a better grip on your student loan wage garnishment situation.

Financial Hardship

If a collector is traing to garnish your student loans, you have one way to get out of it and stop the process for a short amount of time, which can be to prove that you are experiencing financial hardship on either you or you and your family which the cause of this financial hardship is coming from having to pay your student loan payments. The entire act of proving financial hardship can be tough as you must provide proof in the form of all your bills in which certain overlooks expenses are often considered as luxuries and do not count towards your overall monthly expenses.

Income Based Repayment

If you happen to have federal student loans, another student loan garnishment alternative to consider is switching to the Income Based Repayment (IBR) option, which your monthly payments are based off of a certain percentage of what you earn, around 15 to 20 percent in which the the payment can be as low as $5 a month. You can switch back to a different repayment program if and when you start earning more money, which in the case that you don’t the loan term runs out after 25 years of repayment, and if there is any student loan debt left, it is considered taxable income that you have to pay on.

Self Negotiation

The last alternative you can use when dealing with student loan garnishment is directly speaking to one of you lenders representatives and explaining your situation, which can result in a short term or long term forbearance, which is a time period in which you are exempt from having to pay monthly student loan payments, until you get back on your feet and are able to.

Student Loan Garnishment Conclusion

When it comes down to it, commuication is key which it can maintain a good realtionship with your colletor which is a very valuable recource if student loan garnishment ever occurs. If you are already experiencing it or have been getting notifications of student loan garnisment threats, contact your lender right away as they will be much more willing to work with you, instead of not doing anything which lenders hate.

Category: Student Loan Default

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