What to know if you’re at risk of having your wages garnished over student loan debt – JS
Millions of Student Borrowers at Risk of Wage Garnishment
According to estimates from credit bureau TransUnion, as many as 3 million student borrowers could face wage garnishment as early as this summer. The prediction comes as borrowers are at risk of defaulting on their student loans, with approximately 2 million more expected to default by September.
After the pandemic-related pause on student loan payments ended in May, borrowers have had to confront the reality of their loan status and financial situation. The Biden administration’s grace period, which protected credit scores from late or missed payments, also came to an end last fall.
Preparing for Wage Garnishment
Before administrative wage garnishment resumes, borrowers are advised to check the status of their federal student loans on studentaid.gov to avoid default. Many borrowers may not realize that their loans are at risk, especially if they have multiple loan servicers or attended school during different periods.
To prevent wage garnishment, borrowers can enter a rehabilitation agreement or consolidate their loans into a new federal Direct Loan. Contacting loan servicers may be challenging due to long wait times, but reaching out to congressional representatives for assistance can be helpful.
Consequences of Default
If borrowers remain in default, they could have up to 15% of their wages garnished by the government. The Department of Education has warned borrowers about potential actions such as withholding tax refunds and wages starting this summer.
Richelle Brooks, an education administrator in Los Angeles, shared her concerns about the resumption of loan collections. With $239,000 in outstanding debt, Brooks faces monthly payments of $3,000, prompting her to explore options like enrolling in coding classes for loan deferment.
Options to Prevent Garnishment
If borrowers anticipate wage garnishment, there are steps they can take to object and request a hearing to demonstrate financial hardship. The Department of Education must provide a 30-day notice before garnishing wages, allowing borrowers to make their case and submit relevant documentation.
Common reasons for statutory discharge of student loans include school closure, refund non-payment, total disability, or bankruptcy. Borrowers can request a hearing within 30 days of receiving a garnishment notice to halt the process until a decision is made.
Financial literacy is crucial in navigating student loan challenges, and seeking assistance from resources like the Education Department’s Default Resolution Group can provide valuable support.
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