The student loan debt crisis in America just keeps increasing over the years. There are more than 44 million Americans with student loan debt and it doesn’t look like it will slow down.
According to a study made by ADP Research Institute back in 2003, almost 7.2% of employees had their wages garnished in 2013. And, 2.9% of those were for student loan and court-ordered consumer debt garnishment, this number by now is probably way higher considering the student loan debt in the USA now.
In this article, you will learn how you can stop any student loan wage garnishment and get back on track with your student loans.
Why You Are Being Garnished?
Having your wage or tax return garnished is a situation you don’t want to be in besides hurting your credit it will also affect your mental health and get you more stress. Wage garnishment happens when you default on your student loans for more than 9 months and become unresponsive to your loan servicer.
After 9 months or more depending on the type of loan you have, your student loan servicer or collection agency will attempt to contact you with a notice of a hearing.
Assuming you failed to settle your case in a hearing, you will be looking at wage garnishment and the debt collector can garnish up to 25% of your disposable wages or the amount by which your income exceeds 30-times the federal minimum wage (they will deduct whichever is less).
But that doesn’t mean you should dig a hole and give up on your job, there are ways you can fix this. Here’s how.
Student Loan Rehabilitation
Loan rehabilitation means you keep your existing loans with the promise of getting them out of default with a lower monthly payment depending on your income and family size for 9 months. This can also stop having your wages garnished after five successful payments.
Federal rehabilitation is supposed to remove the default status from your credit history. And That’s like 99% of the reason why people rehabilitate instead of consolidating .
The loan rehab process is very easy, you can begin by going to studentloans.gov, from there you should be able to know who is your loan servicer to get in touch with them.
Now if your loans are now with a private debt collection agency and are not showing at studentloans.gov you can visit the website myeddebt.ed.gov from there you will find who is your debt collector agency and you will be able to contact them to begin the process of rehabilitating your loans.
It’s important to know that if you fail to make the payments for 9 consecutive months your loans will get back on default and you will not have another chance to go on rehab.
Once you are back in good standing with your loans, you can opt to consolidate your loans and join any of the repayment plans available to you, to help you find a more affordable monthly payment.
- Pay As You Earn Repayment Plan (PAYE)
- Income-Based Repayment Plan (IBR)
- Income-Contingent Repayment Plan (ICR)
Note: Usually, when an active wage garnishment is taking place the loans will not be allowed to be consolidated. If, on the other hand, your wages have not been garnished yet but you have received a letter that they will be, you might be able to consolidate and remove the default status and stop the wage garnishment from happening.
Wage garnishment is a stressful situation but remember that it’s not the end of the world. You can still get your finances back on track by learning all of the options available to you.