Being Proactive: Stopping The Student Loan Garnishment Process
There are steps you can take to avoid garnishment of your wages to cover outstanding student loan debt.
If you default on a student loan, the U.S. Department of Education (DOE) can try to collect on your loan through a wage garnishment. This means it can take up to 15% of your diposable income. If you receive a wage garnishment order, or are behind in your loan payments and fear a garnishment (or other means of collection), there are steps you can take to avoid the garnishment.
Request a Hearing
If you receive a garnishment order, you have a right to request a hearing. If you request a hearing within 30 days of getting the notification, the garnishment will not proceed until you've had your hearing. If you request the hearing after that time, the garnishment will proceed, but if you prevail in your hearing the garnishment will then stop.
At the hearing you may raise any defense you have to payment of the student loan. For example, you don't owe the money, you are permanently disabled, or you negotiated a new payment plan and are current under that plan.
Even if you don't have a defense to student loan payment, by requesting a hearing you may prompt the student loan collector to agree to a new payment plan.
To learn more about student loan wage garnishments, defenses to payment of student loans, and many other student loan issues, check out the excellent information on the National Consumer Law Center's Student Loan Borrower Assistance Project.
Repayment Plans, Postponing Payments, and Loan Consolidation
The government has various programs under which you can postpone payments on your student loans, get a more flexible repayment plan, or consolidate your loans. Before you've received a garnishment order (or even after), contact your lender and try to get in on one of these plans.
Postponing Student Loan Payments
In certain circumstances you can "defer" your loans -- which means you will have to pay back your loans eventually but are granted a temporary break from payments. Some reasons you may qualify for deferment include: you are unemployed, seeking employment, on active military duty, or serving in the Peace Corps, among others.
If you are facing hard times, your lender may agree to a "forbearance." Like a deferment, you get a temporary break from payments, but unlike a deferment, interest continues to accrue during the break.
Repayment Plans for Student Loans
There are several flexible payment plans available for federal student loans. Examples include plans that allow you to pay your loans over an extended period of time (up to 25 years) and plans that allow your payments to start low and increase over time.
Consolidating Student Loans
A consolidated loan allows you to combine your federal student loans into one loan. By consolidating, you can get out of default and perhaps lower your interest rate.
To learn about the detailed rules for postponing payments, flexible repayment plans, and loan consolidation, see Nolo's Student Loans area.
Repay Student Loans Through Chapter 13 Bankruptcy
If you file for Chapter 13 bankruptcy, you can repay your student loan arrearage through your Chapter 13 repayment plan. Once you file for bankrupty, the automatic stay goes into effect, which puts a stop to the wage garnishment. As long as you continue with the Chapter 13 bankruptcy, make all plan payments, and continue making your current student loan payments, you'll be safe from garnishment. (To learn the basics of Chapter 13 and how repayment plans work, see Chapter 13 Bankruptcy: An Overview.)
Don't Count on Discharging Student Loans in Chapter 7 Bankruptcy
It is extremely difficult to discharge student loans through Chapter 7 bankruptcy. You must meet a "hardship" standard that is very rarely granted. To learn more about what is required under this standard, see Student Loans in Bankruptcy: The Brunner Test.