Student loan debt plagues more than 45 million individuals across the U.S. who owe more than $1.6 trillion. Out of the 45 million people who owe on their student loans, more than 5 million are in default. When a borrower fails to make one payment according to the loan terms, the loan is typically considered delinquent. When a borrower fails to make successive payments over several months, the loan is typically considered in default. When a federal loan goes into default, the government’s first course of action may be to garnish the borrower’s wages.
Wage Garnishment and The CARES Act
Wage garnishment is when a court order forces your employer to withhold a specific amount of your wages to repay a debt. Typical wage garnishment can be up to 25% of the borrower’s taxable income including wages, bonuses, and more. The CARES Act, signed in March 2020, provides every eligible adult with a government check of at least $1,200 as relief from the financial burden created by the pandemic. Eligible adults include individuals with an adjusted gross income of up to $75,000 for single filers.
If your student loans are in default, you might be worried that your stimulus check will be taken or garnished in an effort to repay them; but, it doesn’t work this way. In addition to providing financial assistance through stimulus payments, The CARES Act provides assistance that includes:
- Automatic forbearance to all student loans
- Preventing debt collections for student loans
- Pausing all wage garnishment for 6 months
Borrowers who have trouble repaying student loans may get some relief through The CARES Act. The question is, how can they use both the check and the loan to their advantage?
Do I Have to Use My Check to Pay Down Student Loans?
Individuals who are in default are not required to use their stimulus checks to repay their debts. Experts recommend that individuals with debt use the stimulus compensation to put themselves in an improved financial position, which may be done by paying down debt. The combination of lump-sum payments, no interest, and no penalties makes it possible for defaulted borrowers to bring their loans current or even get ahead.
Despite the relief provided by The CARES Act, some borrowers will continue to struggle. If a borrower has lost their job or was forced to take a pay cut because of COVID-19, they may need to use their stimulus check to put food on the table or keep a roof over their heads. In these situations, it’s in the borrower’s best interest to consult with their lender about alternative repayment options following the automatic forbearance period.
Debt Settlement Attorneys You Can Trust
If an alternative payment option is not enough to make it possible for you to repay your student loans, you need an experienced attorney to assist you. A good debt settlement attorney is skilled at negotiation and can help you walk away from your student loan debt.
The attorneys at McCarthy Law PLC are skilled debt settlement attorneys who will fight for you every step of the way. Under our debt settlement program, we can negotiate with your creditors to only pay a fraction of the cost of what you owe on your student loans. If you’re unable to settle your student loans, you might be eligible for refinancing or loan consolidation. To schedule a consultation with a knowledgeable and experienced debt settlement attorney, call our office at 855-976-5777 or fill out an online contact form today.
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