The U.S. government will garnish or withhold some of your wages if you default on your student loans. This will happen if you don’t make your student loan payments for 270 days (or nine months). There are various ways to stop student loan garnishment: you can get out of default by having a successful hearing, repaying your loan, completing a loan rehabilitation program, consolidating your student loan accounts into a single Direct Consolidation Loan, or filing for bankruptcy.
Request a Hearing
You’ll get a Notice of Intent to Garnish before your wages are garnished. If you request a hearing within 30 days of receiving this notice (or 15 days for some federal student loans), you could stop the wage garnishment before it begins. You can still get a hearing after the notice period passes, but your wages will be garnished during this process. Wage garnishment will only end if the hearing finds in your favor.
You should request a hearing if you think there’s a legitimate reason to challenge your wage garnishment. People most commonly call a hearing because they feel the wage garnishment will place significant financial pressure on themselves and their families. For example, you might qualify if the garnishment could lead to your eviction or your home’s foreclosure.
You could also ask for a hearing in other circumstances, such as:
- You think the loan has already been repaid.
- The loan doesn’t belong to you.
- You already have a repayment plan in place.
- You’ve started making loan payments.
- Your school owed you a refund that it hasn’t paid.
- Your loan documents were forged.
- You’ve filed for bankruptcy.
- Your loan qualified for forgiveness, cancellation, or discharge.
To request a hearing, submit a Request for Hearing form to the U.S. Department of Education. Your hearing can be conducted in person, over the phone, or in writing.
Repay Your Loan
Repaying your loan is the simplest way to end your wage garnishment. However, if you’re like many former students, it’s not the easiest option.
The path is easiest if you’ve received the Notice of Intent to Garnish recently. Make a student loan payment without 30 days of receiving the notice, or 15 days for some federal loans, and you can stop the garnishment starting.
After wage garnishment begins, you’ll need to repay your college debt in full (including the interest charges and fees associated with it) to stop the wage garnishment using this method. This will occur while your wages are still being garnished, reducing the income you have available to make payments. If you have generous and understanding family members, they might help you out. Otherwise, the process could easily take years.
Complete a Loan Rehabilitation Program
If it will take you years to repay your student loan in full, you may prefer completing a loan rehabilitation program.
Direct Loan Rehabilitation is the most common loan rehabilitation program. It’s available to most former students, excluding those with Perkins loans. The program requires making nine payments over ten consecutive months. Perkins loans recipients can also rehabilitate their student loan under a slightly different program. It also requires nine payments, but you must make these over nine consecutive months.
In both cases, you’ll negotiate the payment amount with the U.S. Department of Education. These programs typically ask for payments equaling 15 percent of your discretionary income, but they could be as little as $5. Your wages will still be garnished over this period, but once you’re done, the wage garnishment will stop. You’ll still be responsible for paying off the remainder of your student loan over this period, but you won’t be doing it with the added pressure of wage garnishment.
While these programs will get your student loan out of default, they could come at a cost. Most private lenders will add collection costs to your new student loan balance, so you’ll pay more in the long run. These collection costs can be no more than 16 percent of your student loan’s unpaid principal and interest. Student loans obtained through the U.S. Department of Education do not incur collection costs after rehabilitation. You can also rehabilitate a student loan only once, so it’s vital you get into better payment habits to avoid defaulting again.
Take Out a Direct Consolidation Loan
Consolidating your student loans into a Direct Consolidation Loan is another appealing option for many former students. You can become eligible for a Direct Consolidation Loan in one of two ways. You can get a Direct Consolidation Loan if you agree to the terms of a new repayment plan. This could be an Income-Based Repayment Plan, a Pay as You Earn Repayment Plan, or an Income Contingent Repayment Plan. These plans have extended repayment terms so their monthly repayments are much lower and easier to manage. Alternatively, you can become eligible if you make three consecutive, on-time monthly payments on your defaulted loan before applying for the new Direct Consolidation Loan.
Once you take out a Direct Consolidation Loan, your old student loans, including the one you’ve defaulted on, are considered to be paid off. The Direct Consolidation Loan is the only one you have left.
File for Bankruptcy
Bankruptcy can be a good last resort for people facing serious financial hardship. In most cases, wage garnishment will end when an individual files for bankruptcy.
It is possible to have student loan debt discharged through the bankruptcy process, but many courts will often demand extreme circumstances before considering that as an option. Here are, in general, what bankruptcy courts require to prove undue hardship:
- Repaying the loan will prevent you from maintaining a minimal standard of living
- Your current hardship will continue for a significant portion of the loan repayment period
- You have made good faith efforts to repay the loan before filing for bankruptcy
Courts can be more demanding in the case of student loan debt, going so far as to require proof that the individual may never be able to work again.
Filing for bankruptcy is a serious matter and not something you should undertake lightly or without careful consideration. You shouldn’t file for bankruptcy before speaking to a qualified attorney experienced with bankruptcy and wage garnishment matters.
Wage garnishment can be financially taxing and embarrassing, as your employer becomes aware of your student loan status. However, if you stay calm and take action, you can get out of default and start receiving your full paycheck again.