Student loan wage garnishment works like this: default on your federal student loans and the government can take up to 15% of your paychecks. For example, someone who normally takes home $2,000/month, can have up to $300/month garnished. Loan default happens after 270 days of delinquent payments.
If you're facing student loan wage garnishment, here's what you need to know.
How to know if your wages will be garnished
The collection agency handling your federal loans will notify you by mail before it starts garnishing your wages. The notice serves as your 30-day warning. During this time, you can stop the process by negotiating payment arrangements with the agency. The key is it must receive your first payment in that 30-day window.
If you can’t make a payment within that window, request a hearing to appeal the garnishment. You must request the hearing in writing within 30 days of the date on your collection notice. You can still file an appeal after garnishment starts, but the collection agency will continue to take up to 15% of your take-home pay while the case is being reviewed, which can take two to three months.
A "hearing" sounds intimidating, but it means you'll need to fill out a form detailing your income, debt and expenses. The goal of the hearing is to stop or reduce garnishment.
Contact the collection agency handling your loan to talk about payment arrangements or get details on a hearing request. Not sure whom to call? Log in to your studentaid.gov account to find out who is managing your loan and how to reach them.
» MORE: How to get student loan help
What to do about student loan wage garnishment
The ideal time to take action is when you begin missing student loan payments. At that point, your loan servicer can help you explore other repayment options, including income-based plans that cap your monthly payment, and ask if deferment or forbearance is an option for you.
Once your loans are in default — nearly nine months past due for most federal loans — those options are off the table until your loan is in good standing. You can rehabilitate your student loans to move out of default, which will give you the opportunity to work toward removing the default from your credit reports.
You also have a brief window to consolidate your federal loans (combining them into a single loan with its own interest rate) before the Education Department, via a private collection agency, moves to garnish your wages. Consolidation won't remove the default from your credit reports.
