Can Student Loans Cover Your Salary?
Student loan wage garnishment occurs when student loan officers collect a portion of your paycheck to pay off a delinquent student loan – up to 25% of your available salary, depending on the type of loan. . Salary garnishment can occur if you’ve missed multiple student loan payments, and it can continue until your loan is paid off in full or the default status is resolved. If you’re at risk of falling behind on your student loans, here’s what to know and how to prepare.
What is the student loan payday garnishment?
Payday garnishment is when a loan holder orders your employer to withhold a percentage of your salary in order to force you to pay off outstanding student loan balances. For federal loans, you must have missed nine months of payments before the government can garnish your paycheck, although this may vary for private loans.
In most cases, garnishment is a last resort effort to try to pay off student loans. When it comes to federal student loans, wage garnishment can take place without the loan holder taking you to court. However, most states require loan holders to obtain a court order to garnish your wages in the event of default. private student loans.
With federal student loans, the payday garnishment can continue until your loan balance plus interest and fees are paid off, but it can also end if your loan is canceled. Also note that as part of a series of COVID-19 protections, the federal government has suspended all payday foreclosures on overdue federal student loans until at least September 30, 2021.
How Much Can You Enter for Student Loans?
Loan holders can seize up to 15% of your available salary to pay off your federal student loans and up to 25% of your available salary to pay off private student loans, although this may vary from state to state. other. “Compensation available” in this case means the amount of money you receive on your paycheck after applicable deductions.
How to stop the student loan payday garnishment
When it comes to federal student loans, you have a number of payday garnishment rights. For example, you have the right to receive a notice from the US Department of Education that explains their intention to garnish your salary in 30 days, as well as information regarding your debts. You also have the right to view your student loan debt records.
Plus, there are many steps you can take to avoid wage garnishment on delinquent student loans.
Enter into a voluntary repayment agreement
To avoid wage garnishment related to federal student loans, you can negotiate repayment terms with the US Department of Education or the collection agency assigned to your account. For this to work, however, you need to make sure that your first payment is made no later than 30 days from the date you sent the notice of garnishment.
Entering into a voluntary repayment agreement is the first step you need to take to get back on track and eventually get your federal student loans out of default. Ultimately, however, you might also consider a loan turnaround or loan consolidation.
With loan rehabilitation, you are required to sign an agreement to make nine agreed monthly payments based on your income over a period of 10 consecutive months. To consolidate delinquent federal student loans, you must either sign up for a new income-based repayment plan or make three consecutive full monthly payments on time on the delinquent loan.
Private lenders may also be willing to negotiate a repayment agreement or a loan settlement, although the details are up to the specific lender.
Oppose garnishment and request a hearing
With federal student loans, you can also decide to oppose the wage garnishment and request a formal hearing. This might be your best option if you do not agree with the existence of student loan debt that you are being asked to pay or if you do not agree with the amount. You can also request a hearing if you think the wage garnishment could create extreme financial hardship in your life, or if you have been employed for less than 12 months after losing a previous job.
In all cases, you must make a request for a hearing in writing and ensure that it is postmarked no later than 30 days from the date on which the garnishment was sent. You must also provide evidence to support your objections to the debt or garnishment and pay all costs associated with hiring a lawyer to represent you at an in-person hearing.
If your hearing is successful, your wages will not be garnished for a period of 12 months, or you may be eligible for partial (reduced) garnishment. If your hearing fails, your salary will be garnished at 15% of your available salary.
Tips for avoiding student loan default
Student loan default can quickly become an expensive mess, and this is especially true once a collection agency steps in. As a result, your best bet is to avoid default at all costs if you can.
If you’re worried about your future student loan repayments, here are some tips that can help:
- Examine postponement and tolerance. Although federal student loans do not require payment until September 30, 2021, at the earliest thanks to the coronavirus forbearance period, you may be able to apply for adjournment or abstention options after this date. The federal government has many of these options available, and you can find out what options you have on your private loans by contacting your lender.
- Change your repayment plan to get a lower monthly payment. Several repayment plans are available for federal student loans, including extended repayment plans that can last up to 30 years. You may be able to get a lower monthly payment if you opt for a longer repayment term.
- Switch to an income-based repayment plan. Income-based repayment plans allow you to pay a percentage of your discretionary income to federal loans for 20 to 25 years, at which time any remaining loan balances are written off. Since your monthly payment can be as low as $ 0 on these plans, they can be a good option for low-income borrowers who are struggling to repay their loans.
- Refinance your student loans. To consider refinance your student loans to get a lower interest rate, a lower monthly payment, or both. Remember, refinancing federal loans with a private lender means giving up federal protections such as deferral, forbearance, and access to income-driven repayment plans.