Student Loan Wage Garnishment Looms, Here's How To Appeal Or Stop It
Young woman thinking while watch class at university
The federal government is ramping up its collections engine and could soon go after millions of Americans. One area of concern for the close to 10 million student loan borrowers who are delinquent on their loans is student loan wage garnishment, which could soon be making a comeback; however, there are others, including a recent policy change to Social Security overpayments that could lead to 100% withholding. Regardless of the reason, it's crucial for individuals to understand their options when receiving a collections notice and to act quickly.
After a three-year pandemic relief pause on collections, the government has resumed seizing wages for defaulted federal student loans as of late 2023. While the Department of Education's Fresh Start program paused collections for eligible defaulted borrowers for one extra year, that grace period expired in 2024. Defaulted borrowers may again have a portion of their paychecks withheld, which is known as administrative wage garnishment. "Your loan holder can tell your employer to withhold up to 15% of your wages to collect your student loan debt without taking you to court," as the National Consumer Law Center's Student Loan Borrower Assistance project notes.
This garnishment continues until the defaulted loan is paid off or removed from default. It is important to note that your employer cannot fire you for student loan wage garnishment. Before any garnishment begins, you will get a notice letter explaining how to request a hearing to contest the action. Don't ignore this notice and act quickly.
In short, wage garnishment is back, but borrowers can appeal or stop a student loan garnishment before it wreaks havoc on their finances. Here's how.
Federal law requires that you receive a Notice of Intent to Garnish before any money is taken from your paycheck. That advance notice allows you to avoid or appeal the garnishment. If you've received a garnishment notice, acting quickly can prevent severe financial strain. Here are the key steps to stop a student loan wage garnishment or appeal it, along with your rights at each stage:
Don't ignore the garnishment notice – request a hearing immediately. As soon as you get a Notice of Intent to Garnish, exercise your right to a hearing. You typically have 30 days from the date on the notice to request an official hearing. Filing this request on time puts the garnishment on hold until your hearing, as LegalZoom notes. Even if more than 30 days have passed, you should still request a hearing; the wage withholding might begin, but you can still present your case and stop the garnishment if you win the appeal.
In preparing your defense, remember that the most common objection, according to LegalZoom, is that the garnishment would cause you or your family undue financial hardship. Other legitimate defenses include proving the debt is not owed—for example, showing that the loan has already been repaid or that you are currently participating in a repayment plan for the loan, as well as situations like filing for bankruptcy or qualifying for a loan discharge. If you raise these issues, the government will usually consider whether or not you have any defenses to the debt when reviewing your case (Note that claiming general financial difficulty isn't always enough; authorities may only stop garnishment for "significant and urgent hardship, such as an eviction, foreclosure, or utility shut off," according to the NCLC Student Loan Borrower Assistance project.
If you can afford some payment, immediately contact the loan holder or Default Resolution Group to set up a voluntary repayment agreement. Your garnishment notice will set a response deadline of 30 days from when your notice was sent, and your payment has to be received by this date to stop the garnishment process. In other words, you can avoid wage garnishment entirely by making a payment or establishing a repayment plan within that 30-day window. Even after that deadline, it's not too late to negotiate. Once you enroll in a new payment plan and make a payment, the garnishment order can be released, stopping further deductions from your paycheck.
Another avenue to halt garnishment is the loan rehabilitation program, which lets you cure your default by making a series of agreed-upon payments. In a rehabilitation agreement, you typically commit to about nine reasonable, affordable monthly payments to rehabilitate the loan. Remember that under this option, the garnishment of your wages will continue until the default status has been removed. In practice, you must complete the required rehab payments before the garnishment officially ends. The benefit is that the default is cleared from your record after rehabilitation, wage garnishment stops, and you regain eligibility for federal student aid and programs.
A faster way out of default is to consolidate the loan into a new Direct Consolidation Loan. LegalZoom explains that 'defaulted loans can be consolidated into a Direct Consolidation Loan' and that once you consolidate, "your old student loans, including the one in default, will be paid off." This immediately lifts the default status and should stop any wage garnishment. Consolidation can be quicker than rehabilitation (since you don't have to make multiple payments first). Still, you must agree to an income-driven repayment plan on the new loan or make a few on-time payments beforehand to qualify. If you choose this route, check consolidation requirements with your servicer or the Default Resolution Group.
Student loan borrowers have clear rights and options – from requesting a hearing to setting up a payment plan, rehabilitation, or consolidation – to stop student loan wage garnishment. Most importantly, the moment you receive a garnishment notice, take action. Whether it's a student loan or a Social Security overpayment, timely action is your best defense against aggressive debt collection.
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