Student loans can bring education within reach, but paying them off after graduation requires that you earn enough income to keep up with payments. If you can’t find a repayment plan that fits your budget or qualify for a deferment, you could end up defaulting on your loans.
Read on to learn what to expect with wage garnishment to collect on your student loan debt. You’ll also learn about options for stopping the garnishment and get ideas on where to go for help if you’re unable to solve the problem yourself.
- Student loan lenders can garnish your wages to force repayment of loans in default.
- If you’re facing wage garnishment, you should respond to your notification from lenders and seek a repayment alternative before the garnishment is ordered.
- If your wages have already been garnished, you can remove the order by rehabilitating the loan.
Definition of Student Loan Garnishment
Student loan garnishment happens when your employer pays money you owe to a student loan lender. When you default on a loan, lenders can gain the right to demand a portion of your pay, and your employer is generally required to cooperate.
Both private lenders and the federal government can and will garnish wages on defaulted loans:
- For federal student loans like Stafford and PLUS loans, there’s no need for a legal judgment against you—garnishment is allowed “administratively.”
- Private lenders face more hurdles and typically need to bring legal action against you (i.e., take you to court) and win a judgment against you.
Students (and former students) aren’t the only ones at risk of wage garnishment. Lenders can garnish wages when parents take out loans for their children, and anybody who defaults on a loan they co-sign may also face wage garnishment.
How To Stop Garnishment for Student Loans
Unfortunately, most loan servicers (that’s the company you send payments to) do not provide much information on stopping wage garnishment from defaulted student loans. They might not know what your options are, and they have no incentive to spend time helping you figure everything out. Fortunately, you might have more solutions available than you think.
Lenders usually only garnish wages after they try to collect using other approaches. You should receive plenty of mail (electronic and old-fashioned) informing you that you’re behind on payments. Even when you can’t send money right away, it’s best to communicate with lenders. Doing so enables you to track the process, know what to expect, and monitor the options available at each step.
We’ll cover the specifics below, but as a quick overview, there are at least four ways to prevent or stop garnishment:
- Win a hearing.
- Consolidate your student loans into a new loan.
- Rehabilitate your loans.
- Pay off the debt (or at least enter into a repayment agreement).
If you do nothing, the federal government can begin Administrative Wage Garnishment (AWG), taking up to 15% of your pay each pay period until the loan is paid off.
Beyond taking your earnings, the Department of Education has additional methods to collect on student debt. These include withholding your tax refunds, reducing your benefits (such as Social Security), and taking assets from your bank accounts.
Review Your Notice of Intent
Before garnishment begins, the Department of Education must notify you of its intent to garnish your wages. You should receive a letter at least 30 days ahead of time with critical details. If you receive a notice of intent, read the letter as soon as possible. You need to act quickly to prevent garnishment from starting.
Follow these steps to begin taking control of the situation:
- Read the notice carefully. It explains your rights.
- Verify that the debt is legitimate and that the amount is correct.
- Contact your lender to discuss any alternatives available to you.
- Evaluate your options (including consolidation into a new loan), but be careful about moving from federal student loans to a private lender.
Plead Your Case
There are several ways to get out of garnishment. The list below contains some of your options, and additional strategies may be available:
- Hardship: During a hearing, show that the proposed garnishment would create an “extreme financial hardship” for you or your dependents. You need to provide documentation, including details about your finances, to prove that you’re facing a hardship. Show that your income and necessary expenses make your student loan payments unrealistic.
- Employment: Demonstrate in a hearing that you’ve been in your current job for less than 12 months and you were involuntarily terminated from your previous job (fired or laid off, for example).
- No default: Verify with your servicer that you repaid the loan, you’re current on the loan, or you’re already in a repayment program with your loan servicer. You must be current on those payments.
- Forgiveness: Your loan may be eligible for forgiveness if you’ve worked in public service for over 10 years.
- Not your debt: Prove in a hearing that you’ve been confused with somebody else due to an error or ID theft and you don’t owe the money.
To prevent your wages from being garnished, request a hearing with the Department of Education. This process allows you to explain your side of things, and it postpones the start date of your garnishment. Submit your request within 30 days of the date on your notice of intent.
Consolidate Your Loans
Consolidating your student debt can potentially prevent wage garnishment. Consolidation happens when you get a new loan to pay off existing debts. Then, you just make one monthly payment until the debt is gone.
You can’t consolidate if your wages are already being garnished. But if you’re able to consolidate before wage garnishment begins, you may get relief.
How does consolidation help? You might be able to obtain a more affordable monthly payment—a surprisingly low payment in some cases. What’s more, you end up with a brand-new loan in good standing instead of your old defaulted loans. To consolidate a loan that is already in default, the Department of Education requires that you take one of two options. You can use a consolidation loan with an income-driven repayment option. Or you can get an agreement from your current lender after three successful payments), such as:
- Pay As You Earn Repayment Plan (PAYE)
- Income-Based Repayment Plan (IBR)
- Income-Contingent Repayment Plan (ICR)
Getting a loan with an affordable payment helps you get out of garnishment, and it puts you on the road to better credit scores. Your credit improves with each successful payment, so you can gradually rebuild your credit. Just be sure to make all of your payments on time, and communicate with your lender if you foresee trouble making payments. Lenders may be able to adjust your payments, and you might qualify for deferment or forbearance.
If you decide to consolidate, be careful about switching out of federal student loans and into private loans. Federal loans have borrower-friendly benefits that will be gone for good if you move out of the federal system. It’s rarely a good idea to give up those benefits. However, some private lenders offer attractive terms, so you have to evaluate the risks and benefits of both types of loans.
Consolidating doesn't reduce the amount of debt—you just move it to a different loan.
With loan rehabilitation, you keep your existing loans. But you remove them from default by getting back on track with payments. Your loan goes into default when you don’t make a payment for 270 days. While in default, you lose eligibility for certain benefits for your loan (like deferment, forbearance, and forgiveness).
You must make nine successful monthly payments to remove the default status. Your lender determines how much those payments must be, although Federal Student Aid should consider these payments “reasonable” and “affordable.”
Rehabilitation can be difficult when money is tight. You essentially make two monthly payments on your student loan. The first is the garnishment amount taken from your pay; the second is payment required from you under the rehabilitation program (the garnishment is counted separately). On the bright side, it’s possible that your rehabilitation payment will be relatively small. Depending on your income, it could even be as low as $5 per month.
Speak with your loan servicer to start rehabilitation, and ask what happens after you complete the process. How much are your payments? Are any alternative payment plans available?
Pay Off the Debt
Another option is to simply pay off the loan—or at least get into a repayment program that satisfies your lender, loan servicer, or collection agency. Of course, if you had that kind of money available, you wouldn’t be in default. Still, it’s always possible that your circumstances have changed or your lender is willing to work with you.
Seek Outside Help
If you’re struggling with student loan debt, a credit counselor may be able to help you get back on solid ground. A nonprofit agency can provide education and guidance on managing your funds, and they may even be able to help with the logistics of your payments. To find a reputable provider, see our list of the best credit counseling agencies.
If paying off your loans seems impossible at their current amounts, you might be able to negotiate a settlement for less than you owe. However, lenders need to agree to your offer, and there’s no guarantee that they will. Still, you can always try. You can get help from reputable debt relief companies or attempt to negotiate on your own. For ideas on who to contact, check out our list of the best debt settlement options for borrowers.
The Bottom Line
Wage garnishment can make things a little awkward at work (briefly), but it really shouldn't be a big deal.
If your employer receives an order from the Department of Education to garnish your wages and pay off your student loans, your employer needs to comply. However, your employer cannot fire you for having a single garnishment from your paycheck. If you owe on multiple debts or obligations, it’s possible that you could be terminated, but laws vary from state to state.
Garnishing your wages creates a small amount of administrative work for employers. But the work is not much different from typical payroll duties.
Employers cannot discriminate, and they cannot share information about your garnishment with other staff. This is a private matter, and employers face stiff consequences for breaking these laws.
Don’t expect employers to be happy about garnishing your wages or helpful when you have questions. You also shouldn’t take wage garnishment personally—there’s a good chance that your payroll contacts do not have the answers you’re looking for. If your wages have been garnished, your first stop should be with your lender to seek out one of the solutions above.