Defaulting on a student loan can result into different types of penalties, including tax offsets, collection charges, and wage garnishment. It is important for an individual to evaluate their options and choose a student loan and loan repayment method that suits their financial circumstances and personal preferences. A wise decision at the beginning of the process can save you from getting your name on the defaulting list and losing your hard-earned money.
What is Wage Garnishment?
Wage Garnishment is a type of collection method used by the lenders of student loans. It is a process that allows the employer of the borrower to deduct a fraction of the borrower’s earning and diverts them towards payment of their defaulted student loan.
Every state has a different law regarding the amount of income garnished. Generally speaking, 15 percent of the debtor’s disposable income is deducted and utilized for the payment of student loan debt.
The Consumer Credit Protection Act allows the government to use a portion of the debtor’s earnings for the repayment of outstanding federal student loans. This law directs that the method can be used for the repayment of both defaulted and delinquent student loans.
How Does The Process Work?
In case of outstanding federal student loans, the income garnishment method used for the collection of outstanding debt is known as Administrative Wage Garnishment (AWG). Using this method, the lender or their agency can direct the borrower’s employer to cut 15 per cent of the defaulter’s daily disposable income and use it for the payment of student loan debt. This process continues until all defaulted federal student loans are paid back in full.
The guaranty agency is legally bound to inform the borrower one month prior to the initiation of wage garnishment. The notice should contain information on the government’s intention to deduct their wages for loan repayment, the borrower’s right, and the method to appeal against wage garnishment. The borrower can file an appeal within 15 days of notice delivery. If the borrower fails to file a case within the specified time limit, the government and the guaranty agency can carry on with the wage garnishment process.
What Are Some Ways to Avoid or Appeal Wage Garnishment?
There are a number of ways a borrower can avoid the penalty of wage garnishment and use their income to pay off their student loan debts. We are listing some of them here.
- Wage garnishment can be avoided by presenting a document known as Financial Disclosure Statement. The document is to be submitted to the DoE and it must state that the borrower is unable to make their monthly loan payments because of extreme financial hardships.
- The borrower can put off wage garnishment by making acceptable payment arrangements. He or she must make a payment within one month of getting the notice in order to avoid deduction of 15 percent of their wages.
- Another way to avoid wage garnishment is to request a hearing within one month of receiving the letter by the lender. For Federal Family Education loans, the borrower must request a hearing within 15 days of receiving the hearing. If the debtor fails to request a hearing within the designated time limit, the government may continue with wage garnishment; however, the process can be stopped if the case ends in favor of the applicant.
What the Student Loan Relief Department Can Do For You?
Most of the borrowers default on their federal student loans due to lack of resources. In such conditions, default penalties like wage garnishment can further add to the hardships and make an individual completely unable to even pay for daily necessities. In order to avoid wage garnishment, it is important that you choose the right loan repayment plan and organize your finances to avoid defaulting on your student loan.
The Student Loan Relief Department is a private firm that helps people avoid student loan default penalties by helping them choose the best loan repayment plan. We can negotiate with the agency on your behalf, make necessary repayment arrangements, and save your money from being garnished.
If you would like our experts to assist you with loan repayment process, you can contact us at (855) 880-0210.