A-Z Guide To Escape Student Loan Debt: 3. Garnishment

If you are in this section that means they’ve got you at your job! What happened? Well regardless, if they found your job or know where you work you’ll need to take action immediately! Remember once the garnishment paperwork makes it to your payroll office they will begin deducting 15% of your disposable income immediately for the life of your balance, as long as you’re employed with that company!  This 15% deduction also applies to raises and bonuses! ANY MONEY that comes out of your payroll department directed to you! Just because they’re getting a portion of you check doesn’t mean they’ll stop taking your tax returns!

Example: Disposable Income $3000.00 a month. $3000xThe 15% Garnishment= A $450.00 WAGE DEDUCTION

So! You’re currently being threatened with garnishment. Did you receive a collection call at work? Did your payroll rep. notify you that someone verified your employment for a garnishment? Did a federal student loan collector give you a deadline to meet their payment terms by a certain date? Or do you not know that the Department of Education already knows where you work!? Whatever the case, if the Department of Education or the assigned collection has already located your job you’ll need to seek repayment immediately (section 2 of Quick Start A-Z Guide) and work fast! It’s much more beneficial to make the payments on your own rather than letting them take it from your check. Send in a payment immediately to buy yourself 60 more days before they can initiate a garnishment against you. Be reasonable with the payment amount you end up mailing, try not to send any payments under $15.00. Make sure you call Dept. of Education’s customer service line at 800-621-3115 to find out the date your check posted. Once you know the date you’ll have 60 days from that exact date before the Department of Education or the assigned collection agency submits
your account for garnishment.  Refer to page224124 on the student loan blue print to learn all you need to know about federal student loan garnishments.

Or did you already receive a letter from the Department of Education regarding their intentions to garnish your
wages? If this is the case the letter you’ve received is what Department of Education and their collection agencies call the “T-12 Notice” or the “Notice Prior to Wage Withholding.” Once this letter is sent it means they’ve already submitted your defaulted student loan account for wage garnishment. However in this status the garnishment paperwork hasn’t been sent to your employer just yet. You now only have 30 days from the date this letter was sent to get out of being garnished, and your options become limited. (Contact Department of Education’s customer service center at 800-6213115
and ask them for the date of when the T-12 letter was sent) At this point sending a payment in any
amount will no longer save you and the threat of garnishment is now a reality. Along with the “Notice
Prior to Wage Withholding” should come a Financial Disclosure Form and a Request for Hearing Application. Your first option is to automatically surrender 15% of your wages. Instead of letting the
Department of Education take your money, why not just pay it  yourself?  You can use our Garnishment Calculator to find out what 15% of your disposable pay is, and if it’s something you can
afford, contact the Department of Education or the loan holder immediately before your 30 day  deadline and  discuss this along with the repayment options (section 2 of Quick Start A-Z Guide) in order to avoid being garnished. If you are financially unable to afford to surrender 15% of your disposable income refer to the Garnishment Section on the  Student Loan Blue Print to learn all you
need to know about the options available to you! If you fail to respond within the 30day time frame the Department of Education has set, the status of your defaulted federal student loan changes
and the garnishment paperwork will be sent to your employer.

Has the garnishment already begun for you?  Did your payroll representative just notify you that they’ve received garnishment paperwork for you, and they legally need to begin deducting your wages? Or are you currently being  garnished and you just want it to STOP. If you find yourself in this situation it means that your 30days to respond has already expired and the garnishment  paperwork has already made it to your employer’s payroll representative (Read section right above regarding your 30-day notice). Once your employer receives the garnishment paperwork they’re
bound by law to begin deducting 15% of your disposable income. You may utilize our Garnishment Calculator to find out exactly what 15% of your disposable income comes out to be. At this point your options become very limited and there’s no way to put a stop to the garnishment anytime soon. If you’re already have another garnishment in place regardless of what it’s for, the U.S. Department of Education has the right to deduct up to 25% of your disposable income. Meaning if you currently have a 10% garnishment for something else, the U.S. Department of Education will still take the full 15% of your disposable income on top of the other garnishment and they won’t take the other garnishment into consideration prior to initiating the federal garnishment. However if you’re currently being garnished 25% or over the U.S. Department of Education is unable to legally deduct any percent of your wages because they must stay within 25% of your disposable income. However once the other garnishment for over 25% ends or is reduced, the Department of Education will initiate the deductions for your paycheck immediately after.  They’ll get whatever they can from you. If your
previous garnishment for 25% or more is reduced to 20%, the U.S. Department of Education will step in and snake the other 5% and apply it to your defaulted federal student loan.

As of right now, you’re probably asking yourself “what are my options then?” Well first you’ll need to check to see if you can afford any of the repayment options listed above (section 2 of Quick Start A-Z Guide). If you have enough money to settle out your student loan, it would be highly recommended because a settlement partial payoff is the quickest way to put a federal student loan garnishment to an end. Problem is, not everyone has a lump sum of cash just lying around. So
what’s next? If you’re unable to afford a settlement payoff, then your next option is to look into the payment plans (section 2 of Quick Start A-Z Guide) the Department of Education has available for you. Your next best bet is to start on the Rehabilitation Repayment Program but unfortunately any payment you make will have to be ON TOP of what they’re taking out of your paycheck.  Use our Rehabilitation Repayment Calculator to find out what your minimum payments are, and if you’re able to squeeze that amount through along with your garnishment deductions for the next 9 months, you’re student loan will be taken out of default per the terms of the Rehabilitation Program. Once out of default your garnishment will be stopped.

Now the last question you might be asking is “The garnishment is already going to destroy my  finances, I’m already over my head in bills and I can’t even afford the 15% garnishment, let alone making additional payments on top of that!” Typically if this statement is true, then you should Request an Untimely Hearing for Financial Hardship. You’ll need to fill out the Request for Hearing Application along with the Financial Disclosure Form in order to have a hearing granted for you. (You can find these forms in our Document Archive) Now remember you’ll need to report your income and expenses, and provide copies of your check stubs along with all the bills you report to support your claim. Remember at this point you’ll need to cut off any expenses that are considered luxury expenses. Meaning it’s not a necessity, and you’ll still be able to live without it.