Student loan debt has become a pervasive problem in the United States, with millions of graduates struggling to pay off their loans. In some cases, these struggles can lead to wage garnishment, a process by which a portion of a borrower’s wages is automatically deducted to repay their student loans. Fortunately, there are steps you can take to stop student loan wage garnishment. Here are some practical steps you can follow to put an end to this practice.
Understand What Wage Garnishment Is and How It Works
Wage garnishment occurs when a court orders an employer to withhold a certain percentage of an employee’s wages to repay a debt. In the case of student loans, wage garnishment can occur when a borrower falls behind on their payments and the loan goes into default. Once the loan is in default, the Department of Education can start the wage garnishment process.
Typically, wage garnishment takes a percentage of your paycheck, with the amount depending on your income and the state laws that govern wage garnishment. Wage garnishment can be an overwhelming experience, as it can leave you with very little disposable income.
Know Your Rights as a Borrower
Before you take any steps to stop student loan wage garnishment, it’s essential to know your rights as a borrower. The Fair Credit Reporting Act (FCRA) and the Fair Debt Collection Practices Act (FDCPA) are two laws that protect you from harassment and other unfair practices from creditors and debt collectors.
Under the FCRA, you have the right to dispute any inaccuracies on your credit report. If you’re being garnished, it’s essential to check your credit report to ensure that all information is accurate. The FDCPA prohibits debt collectors from using abusive or harassing tactics to collect a debt. If you’re being harassed by a debt collector or creditor, you can file a complaint with the Consumer Financial Protection Bureau (CFPB).
Contact Your Loan Servicer
If you’re facing wage garnishment, the first step is to contact your loan servicer. Your loan servicer is the company that handles your student loan payments, and they may be able to help you stop the garnishment. If your loan is in default, your loan servicer can work with you to set up a repayment plan or help you apply for loan consolidation.
Apply for Loan Consolidation
Loan consolidation is another option to stop wage garnishment. With consolidation, you combine multiple federal student loans into one loan with a fixed interest rate. This process can make it easier to manage your payments and avoid default. If you’re being garnished, consolidating your loans can also stop the garnishment process.
To apply for loan consolidation, you’ll need to complete an application on the Federal Student Aid website. You’ll need to provide information about your loans, income, and employment. If you’re approved for consolidation, your new loan will have a fixed interest rate and a new repayment term.
Apply for Loan Rehabilitation
Loan rehabilitation is another option to stop wage garnishment. With rehabilitation, you agree to make nine voluntary, on-time payments over ten months. After you’ve made these payments, your loan will be considered current, and the wage garnishment will stop.
You must speak with your loan servicer to submit an application for loan rehabilitation. Your monthly payment will be calculated in collaboration with them based on your income and outgoings. After you’ve made your nine payments, your loan will no longer be in default, making other repayment options available to you.
File for Bankruptcy
Filing for bankruptcy is a last resort option to stop wage garnishment. Bankruptcy can help discharge certain types of debt, including student loans, but it’s a complex process that has long-term consequences on your credit and financial standing. Before considering bankruptcy, it’s essential to speak with a bankruptcy attorney to determine if it’s the right option for you.
Under the Bankruptcy Code, it’s challenging to discharge student loans. To qualify for a discharge, you’ll need to show that paying back the loans would cause undue hardship. This is a difficult standard to meet, and most borrowers are unable to discharge their student loans through bankruptcy.
If you’re considering bankruptcy, it’s essential to know that it can have long-term consequences on your credit score and ability to obtain credit in the future. Additionally, filing for bankruptcy can be a costly and time-consuming process that requires legal assistance.
Seek Legal Assistance
If you’re facing wage garnishment, seeking legal assistance can be a helpful option. A lawyer can review your case and help you understand your legal rights and options. They can also help you negotiate with your loan servicer and creditors to come up with a plan to stop the wage garnishment.
Legal assistance can be costly, but many nonprofit organizations offer free or low-cost legal services to borrowers in need. It’s essential to research your options and find a reputable organization with tax resolution/consultation services to help you with what you need.
Wage garnishment can be a stressful and overwhelming experience for borrowers struggling to repay their student loans. However, there are steps you can take to stop wage garnishment and get back on track with your loan payments. By understanding your rights as a borrower, contacting your loan servicer, and exploring options like loan consolidation, loan rehabilitation, and legal assistance, you can take control of your finances and stop the wage garnishment process.