Most federal student loans have a standard ten-year repayment term. However, many graduates find themselves unable to afford their monthly payments to pay off their loans within that time frame. As a result, many borrowers go into default. When you default on your student loans, the federal government can collect the money through other avenues—like wage garnishment. Wage garnishment is a legal process that allows the government to withhold up to 15 percent of your paycheck until your loan has been paid back.
If you are experiencing wage garnishment due to a failure to make payments on your student loans, it’s important to gain control over the situation. Going into default and experiencing wage garnishment will negatively impact your credit score and possibly your relationship with your employer. Working with a skilled student loan debt lawyer is the best way to understand your options and enter the best repayment plan for your situation.
What Is Student Loan Wage Garnishment?
After a payment is 90 days late, your student loan lender will contact the major credit bureaus and report your loans as delinquent. If after 270 days you have still failed to make your payments, the government will typically change the status of your loans from delinquent to “in default.” Having your loans go into default should be avoided at all costs, as it can have an adverse impact on your credit score.
When a loan goes into default, it means the entire balance of the loan and its accrued interest is due immediately, even if your balance is unfeasibly high. Additionally, your loans will be sent to a collection agency. Collection agencies have fees—up to 40 percent of your loan balance in some cases— that you’ll also be responsible for. Since most people whose loans go into default can’t pay their balance in full, they are likely to experience wage garnishment, which allows the government to collect the money they owe from their paycheck.
How Do I Avoid Wage Garnishment?
Wage garnishment can and should be avoided. Even if you are experiencing economic hardship and can’t afford your monthly payments, there are avenues you can take to avoid going into default. Some ways to avoid wage garnishment include:
- Making your payments on time. If you have multiple loans, it can be challenging to keep track of the different minimum payments and due dates. Setting up automatic payments is the best way to ensure you don’t miss one.
- Enrolling in an income-driven repayment plan. Under an income-driven repayment (IDR) plan, your payment term and amount are set to a percentage of your discretionary income. This can drastically reduce your monthly payments.
- Applying for deferment and forbearance programs. If you are unemployed or experiencing significant economic hardship—such as expensive medical bills—applying for a deferment or forbearance program may be a good option. These programs allow you to postpone payments while you get back on your feet.
If you cannot afford your monthly payment, these are a few viable ways to avoid going into default and wage garnishment. However, the best option for you will depend entirely on your situation, which is why it’s best to consult a student loan lawyer.
What to Do If You Are Experiencing Wage Garnishment
If you are currently experiencing wage garnishment, there are still ways to gain control of the situation:
- Consolidating your loans. If you have federal student loans, entering a direct consolidation loan can extend your repayment term and decrease your monthly payments. However, this usually means that you’ll end up paying more in interest than with your original loan.
- Rehabilitating your loans. In a rehabilitation agreement, you agree to make nine monthly payments within ten consecutive months. Your loan servicer will then set your monthly payment to 15 percent of your discretionary income divided by 12.
- Paying off the entirety of your loan. If you are experiencing wage garnishment and have a nest egg of savings or a family member who can help you out, it may be worth it to pay off your loan in full. This is the best and fastest way to get out of default and stop your wages from being garnished.
Contact a Skilled Arizona Student Loan Lawyer
Experiencing wage garnishment can be demoralizing. If you are experiencing wage garnishment and struggling to figure out the best repayment plan for your situation, consider working with a skilled student loan lawyer.
At McCarthy Law, our attorneys are dedicated to helping students navigate the complexities of the student loan system. Under our student loan debt settlement program, our licensed attorneys negotiate with lenders to ensure our clients pay only a fraction of their original loan balance. To schedule a consultation with one of our skilled student loan settlement attorneys, call (855) 976-5777 or fill out our online contact form.